Nixon shock

And the way that this was dealt with was with the Volcker shock, which caused, uh, hardships in the US and global economy, especially the global economy.

And it's part of how the US righted itself and put itself back on top after the, uh, end of the Bretton Woods system and the gold standard, or the soft gold standard, that had held since the end of World War II up until 1971, and the so-called Nixon Shock when they went over-- when they went off the gold standard.

And the, uh, the massive spike in interest rates allowed, or it, it forced those countries that had taken a whole lot of loans from the petrodollar-rich countries, uh, you know, in the '70s, [clears throat] it forced them into, uh, bankruptcy and sort of IMF servitude o- over the course of, uh, the coming-- the years that followed.

Uh, and this was a way that the US and US high finance, uh, US oligarchs, uh, they were able to buy up the commanding heights of these economies and, uh, really s- just to feast on them.

My guests in this episode of Hidden Forces are Maric Flemon and Nicolas Collin, co-authors of Currency of Power, a newsletter exploring the new monetary order that they argue is emerging in the form of stablecoins, programmable money, agentic commerce, and the commodification of compute.

By the end of today's conversation, you will have a much richer understanding why the global financial system may be on the cusp of a structural transformation comparable to that which accompanied the Nixon shock that ended convertibility of the dollar into gold and the collapse of Bretton Woods in the early 1970s.

This includes a discussion about how the maturation of the digital economy is creating the conditions for new waves of financial innovation, why dollar-backed stablecoins and programmable money sit at the center of that transformation, what China's parallel efforts to build insulated financial rails means for the future of dollar dominance, and how the rise of machine-to-machine commerce and the commodification of compute could reshape the monetary order in ways that most policymakers and investors have yet to fully appreciate.

Maric, Nicolas, and I spend the episode's first hour discussing why they believe we are living through the initial phase of a great financial reset, and the similarities between the present era and that of the 1970s and early 80s, when a convergence of geopolitical shocks, financial innovations, and technological revolutions transformed the global economy and capital markets in ways that would have been otherwise unimaginable.

One of the things that happened during the 1970s was a financial reset, a complete upheaval of the international financial system, by which I mean not only the Bretton Woods system, the IMF, the dollar being linked to gold, et cetera, but also who participates in the market, what is traded in the market, how companies are funded, how capital is raised, et cetera.

And if you go through a list of everything that was invented or emerged during the 1970s, it's mind blowing in terms of financial innovation.

So it starts with something known as the Nixon shock when the US decides to cut the link between the dollar and gold.

That's 1971.

[laughs]

... uh, countries stop using the dollar to, to denominate the, um, the purchases of crude oil, which was the whole point of having a petrodollar post, uh, the Nixon Shock of, you know, 1971.

We were supposed to have this, this linkage of, of energy and the dollar, and we just let it lapse, but now we're back in the, this region, trying to create dollar supremacy.

Is that what we're doing? I, I hang a question mark over it, because we're certainly hurting ourselves.