43 Years Ago: Nixon Shock- End of Gold Convertability

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RIchard Nixon in 1971 (Public Domain)On the afternoon of Friday, August 13, 1971, Then Federal Reserve Chairman Arthur Burns, Incoming Treasury Secretary John Connally and then Undersecretary for International Monetary Affairs and Future Fed Chairman Paul Volcker, along with 12 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.  

To prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates, on August 15, 1971 Nixon directed Treasury Secretary Connally to suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold. FULL HISTORY (Wikipedia)

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