August 14, 1971
And what is Sri Aurobindo doing?... Do you see him?
I don't “see” him – I feel his presence.
Recently I read some of his letters about
me.... How? It's really a miracle that I survived [his passing].... My
whole... [being collapsed]. He was such a marvelous protection and
support!
The inner being wasn't affected because that
remained the way it was – the closeness, the intimacy remained the same –
but the physical being.... It's a miracle it survived.
Several days ago I saw Sri Aurobindo and he was busy with money – he was receiving money, he was even receiving things in
gold.1
(Mother laughs)
That surprised me.
Why?
I don't know, I didn't imagine him having that kind of activity.
That wasn't necessary because I was there.2
But I know he was interested, in the sense that he thought money should
come very freely and abundantly. He always thought that people should
give
all they had – for him that was an absolute rule. One shouldn't have to ask – they should spontaneously give all they had.
all they had – for him that was an absolute rule. One shouldn't have to ask – they should spontaneously give all they had.
1 Perhaps coincidentally, two days later, on August 16, the dollar was “devalued” and the Bretton-Woods accords were broken.
2 Mother means that
while Sri Aurobindo was alive, it was not necessary for him to be
concerned with money because Mother was there.
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Nixon Shock
From Wikipedia, the free encyclopedia
The Nixon Shock was a series of economic measures taken by United States President Richard Nixon in 1971 including unilaterally canceling the direct convertibility of the United States dollar to gold. It helped end the existing Bretton Woods system of international financial exchange, ushering in the era of freely floating currencies that remains to the present day.
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Background
In 1944, the Bretton Woods system fixed exchange rates based on the U.S. dollar, which was redeemable for gold by the U. S. government at the price of $35 per ounce. Thus, the United States was committed to backing every dollar overseas with gold. Other currencies were fixed to the dollar, and the dollar was pegged to gold.For the first years after World War II, the Bretton Woods system worked well. With the Marshall Plan Japan and Europe were rebuilding from the war, and foreigners wanted dollars to spend on American goods - cars, steel, machinery, etc. Because the U.S. owned over half the world's official gold reserves - 574 million ounces at the end of World War II - the system appeared secure.[1]
However, from 1950 to 1969, as Germany and Japan recovered, the US share of the world's economic output dropped significantly, from 35 percent to 27 percent. There was less demand for dollars and more demand for deutsche marks, yen, and francs. U.S. spending on the Vietnam war and domestic social programs flooded the world with dollars.[1]
By the early 1970s, as the costs of the Vietnam War and increased domestic spending accelerated inflation,[2] the U.S. was running a balance-of-payments deficit and a trade deficit. By 1971, America's gold stock had fallen to $10 billion, half its 1960 level. Foreign banks held many more dollars than the U.S. held gold, leaving the U.S. vulnerable to a run on its gold.[1]
By 1971, the money supply had increased by 10%.[3] In May 1971, West Germany was the first to leave the Bretton Woods system, unwilling to devalue the Deutsche Mark in order to prop up the dollar.[2] In the following three months, this move strengthened its economy. Simultaneously, the dollar dropped 7.5% against the Deutsche Mark.[2] Other nations began to demand redemption of their dollars for gold. Switzerland redeemed $50 million in July.[2] France acquired $191 million in gold.[2] On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar, in an effort to protect the dollar against "foreign price-gougers".[2] On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.[2] The pressure began to intensify on the United States to leave Bretton Woods.
Event
At the time, the U.S. also had unemployment and inflation rates of 6.1% (Aug 1971)[4] and 5.84% (1971),[5] respectively. [notes 1]To combat these issues, President Nixon consulted Federal Reserve chairman Arthur Burns, incoming Treasury Secretary John Connally, and then undersecretary for international monetary affairs and future Fed Chairman Paul Volcker.
On the afternoon of Friday, Aug. 13, 1971, these officials and other high-ranking White House and Treasury advisors met secretly with Nixon at Camp David. There was great debate about what Nixon should do, but ultimately Nixon, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by suspending the convertibility of the dollar into gold, freezing wages and prices for 90 days to combat potential inflationary effects, and impose an import surcharge of 10 percent.[6] "Connally brilliantly packaged the program not as America abandoning its commitment to the gold standard but as America taking charge. He turned the dollar's collapse, which could have appeared shameful, into a moment of hubris."[1]
To prevent a run on the dollar, stabilize the economy, and decrease unemployment and inflation rates, on August 15, 1971, Nixon issued Executive Order 11615, pursuant to the Economic Stabilization Act of 1970, which imposed a 90-day maximum wage and price ceiling, a 10% import surcharge and most importantly, "closed the gold window", ending convertibility between U.S. dollars and gold.
Speaking on television on a Sunday before the markets opened, Nixon said the following:
The American public felt the government was rescuing them from price gougers and from a foreign-caused exchange crisis.[8][9] Politically, Nixon's actions were a massive success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, "We unhesitatingly applaud the boldness with which the President has moved."[1]The third indispensable element in building the new prosperity is closely related to creating new jobs and halting inflation. We must protect the position of the American dollar as a pillar of monetary stability around the world. In the past 7 years, there has been an average of one international monetary crisis every year...
I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.
Now, what is this action — which is very technical — what does it mean for you?
Let me lay to rest the bugaboo of what is called devaluation.
If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.
The effect of this action, in other words, will be to stabilize the dollar.[7]
By December 1971, the import surcharge was dropped as part of a general revaluation of the Group of Ten (G-10) currencies, which under the Smithsonian Agreement were thereafter allowed 2.25% devaluations from the agreed exchange rate. In March 1973, the fixed exchange rate system became a floating exchange rate system.[10] The currency exchange rates no longer were governments' principal means of administering monetary policy.
Later ramifications
The Nixon Shock has been widely considered to be a political success, but an economic mixed bag in bringing on the stagflation of the 1970s and leading to the instability of floating currencies. The dollar plunged by a third during the '70s, and in 1997 several Asian and Latin countries faced currency crises. Even to the present, Paul Volcker regrets the abandonment of Bretton Woods. "Nobody's in charge," Volcker says. "The Europeans couldn't live with the uncertainty and made their own currency and now that's in trouble."[1]In 1996, Paul Krugman summarized the post-Nixon Shock era as follows:
Debate over the Nixon Shock has persisted to the present day, with economists and politicians across the political spectrum trying to make sense of the Nixon Shock and its impact on monetary policy in the light of the recent financial crises. Conservative columnist David Frum sums up the situation this way:The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987—which started out every bit as frightening as that of 1929—did not cause a slump in the real economy. While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible—and, in some countries, they have been quick to take the opportunity.[11]
The modern currency float has its problems. There is no magical monetary cure, monetary policy is a policy area almost uniquely crowded with trade-offs and lesser evils. If you want a classical gold standard, you get chronic deflation punctuated by depressions, as the U.S. did between 1873 and 1934.
If you want a regime of managed currencies tethered to gold, you get regulations and controls, as the U.S. got from 1934 through 1971.
If you let the currency float, you get chronic inflation punctuated by bubbles, the American lot since 1971.
System 1 is incompatible with democracy, because voters won’t accept the pain inherent in a gold standard.
System 2 is incompatible with the free market economics I favor.
That leaves me with System 3 as the worst option except for all the others.[
HE
three parts of the perfection of our instrumental nature of which we have
till now been reviewing the general features, the perfection of the intelligence,
heart, vital consciousness and body, the perfection of the fundamental
soul powers, the perfection of the surrender of our instruments and action
to the divine Shakti, depend at every moment of their progression on a
fourth power that is covertly and overtly the pivot of all endeavour and
action, faith, Sraddha. The perfect faith is an assent of the whole being
to the truth seen by it or offered to its acceptance, and its central working
is a faith of the soul in its own will to be and attain and become and
its idea of self and things and its knowledge, of which the belief of the
intellect, the heart's consent and the desire of the life mind to possess
and realise are the outward figures. This soul faith, in some form of itself,
is indispensable to the action of the being and without it man cannot move
a single pace in life, much less take any step forward to a yet unrealised
perfection. It is so central and essential a thing that the Gita can justly
say of it that whatever is a man's Sraddha, that he is, yo yacchraddhah
sa eva sah, and, it may be added, whatever he has the faith to see as possible
in himself and strive for, that he can create and become. There is one
kind of faith demanded as indispensable by the integral Yoga and that may
be described as faith in God and the Shakti, faith in the presence and
power of the Divine in us and the world, a faith that all in the world
is the working of one divine Shakti, that all the steps of the Yoga, its
strivings and sufferings and failures as well as its successes and satisfactions
and victories are utilities and necessities of her workings and that by
a firm and strong dependence on and a total self-surrender to the Divine
and to his Shakti in us we can attain to oneness and freedom and victory
and perfection.
The enemy of faith is doubt, and yet doubt too is a utility and necessity,
because man in his ignorance and in his progressive labour towards knowledge
needs to be visited by doubt, otherwise he would remain obstinate in an
ignorant belief and limited knowledge and unable to escape from his errors.
This utility and necessity of doubt does not altogether disappear when
we enter on the path of Yoga. The integral Yoga aims at a knowledge not
merely of some fundamental principle, but a knowing, a gnosis which will
apply itself to and cover all life and the world action, and in this search
for knowledge we enter on the way and are accompanied for many miles upon
it by the mind's unregenerated activities before these are purified and
transformed by a greater light: we carry with us a number of intellectual
beliefs and ideas which are by no means all of them correct and perfect
and a host of new ideas and suggestions meet us afterwards demanding our
credence which it would be fatal to seize on and always cling to in the
shape in which they come without regard to their possible error, limitation
or imperfection. And indeed at one stage in the Yoga it becomes necessary
to refuse to accept as definite and final any kind of intellectual idea
or opinion whatever in its intellectual form and to hold it in a questioning
suspension until it is given its right place and luminous shape of truth
in a spiritual experience enlightened by supramental knowledge. And much
more must this be the case with the desires or impulsions of the life mind,
which have often to be provisionally accepted as immediate indices of a
temporarily necessary action before we have the full guidance, but not
always clung to with the soul's complete assent, for eventually all these
desires and impulsions have to be rejected or else transformed into and
replaced by impulsions of the divine will taking up the life movements.
The heart's faith, emotional beliefs, assents are also needed upon the
way, but cannot be always sure guides until they too are taken up, purified,
transformed and are eventually replaced by the luminous assents of a divine
Ananda which is at one with the divine will and knowledge. In nothing in
the lower nature from the reason to the vital will can the seeker of the
Yoga put a complete and permanent faith, but only at last in the spiritual
truth, power, Ananda which become in the spiritual reason his sole guides
and luminaries and masters of action.
nd
yet faith is necessary throughout and at every step because it is a needed
assent of the soul and without this assent there can be no progress. Our
faith must first be abiding in the essential truth and principles of the
Yoga, and even if this, is clouded in the intellect, despondent in the
heart, outwearied and exhausted by constant denial and failure in the desire
of the vital mind, there must be something in the innermost soul which
clings and returns to it, otherwise we may fall on the path or abandon
it from weakness and inability to bear temporary defeat, disappointment,
difficulty and peril. In the Yoga as in life it is the man who persists
unwearied to the last in the face of every defeat and disillusionment and
of all confronting, hostile and contradicting events and powers who conquers
in the end and finds his faith justified because to the soul and Shakti
in man nothing is impossible. And even a blind and ignorant faith is a
better possession than the sceptical doubt which turns its back on our
spiritual possibilities or the constant carping of the narrow pettily critical
uncreative intellect, asuya, which pursues our endeavour with a paralysing
incertitude. The seeker of the integral Yoga must however conquer both
these imperfections. The thing to which he has given his assent and set
his mind and heart and will to achieve, the divine perfection of the whole
human being, is apparently an impossibility to the normal intelligence,
since it is opposed to the actual facts of life and will for long be contradicted
by immediate experience, as happens with all far-off and difficult ends,
and it is denied too by many who have spiritual experience but believe
that our present nature is the sole possible nature of man in the body
and that it is only by throwing off the earthly life or even all individual
existence that we can arrive at either a heavenly perfection or the release
of extinction. In the pursuit of such an aim there will for long be plenty
of ground for the objections, the carpings, asuya, of that ignorant but
persistent criticising reason which founds itself plausibly on the appearances
of the moment, the stock of ascertained fact and experience, refuses to
go beyond and questions the validity of all indices and illuminations that
point forward; and if he yields to these narrow suggestions, he will either
not arrive or be seriously hampered and long delayed in his journey. On
the other hand, ignorance and blindness in the faith are obstacles to a
large success, invite much disappointment and disillusionment, fasten on
false finalities and prevent advance to greater formulations of truth and
perfection. The Shakti in her workings will strike ruthlessly at all forms
of ignorance and blindness and all even that trusts wrongly and superstitiously
in her, and we must be prepared to abandon a too persistent attachment
to forms of faith and cling to the saving reality alone. A great and wide
spiritual and intelligent faith, intelligent with the intelligence of that
larger reason which assents to high possibilities, is the character of
the sraddha needed for the integral Yoga.
