Nixon Shock A negative balance of payments, growing public debt incurred by the Vietnam War and Great Society programs, and monetary inflation by the Federal Reserve caused the dollar to become increasingly overvalued.[22] The drain on US gold reserves culminated with the London Gold Pool collapse in March 1968.[23] By 1970, the U.S. had seen its gold coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists, represented the point where holders of the dollar had lost faith in the ability of the U.S. to cut budget and trade deficits. In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to pay for government expenditure on the military and social programs. In the first six months of 1971, assets for $22 billion fled the U.S. In response, on 15 August 1971, Nixon issued Executive Order 11615 pursuant to the Economic Stabilization Act of 1970, unilaterally imposing 90-day wage and price controls, a 10% import surcharge, and most importantly closed the gold window, making the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was made without consulting members of the international monetary system or even his own State Department, and was soon dubbed the Nixon Shock.
Posted on: Sat, 23 Nov 2013 21:45:09 +0000
Recently Viewed Topics
© 2015