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Bretton Woods and Nixon Gold Shock
Business Week has an intriguing article on how many of our current problems stem from the 1971 Gold Shock (which in turn stems from Bretton Woods)
I’ve long been arguing that it is wrong to blame our current woes on any one party or President because global economics is a decades long process. This article examines how BW contributes to the current mess in Europe which in turn contributes to our own messes.
5 Responses to “Bretton Woods and Nixon Gold Shock”
Fascinating. Brings up so many thoughts.
One is no-cost* economic expansion only works when you have control of your own currency. Once your currency is pegged to one thing or another, you must be prepared for hard choices. Allowing your currency to float is like releasing your belt so you can eat more for dinner. This is what’s going on in Europe: all those nations are tied to an unyielding Euro, and hence are going bankrupt.
* by no-cost I mean without having to go through cycles of austerity programs, inflation, pain, etc. We’ve had it remarkably well between Bretton Woods and now. All the recessions since then were either caused by global politics (70′s oil embargo, for example), irrationally exuberant bubbles (90′s dot.com bust, etc.), or various shocks (9/11, etc.).
How do we use the benefits and machinations of a floating currency to help us now? Inflation rates are at historic lows, but banks aren’t lending. The Fed dumped billions into the economy through sham mechanisms, and businesses aren’t investing. Even without this Teabagger-fueled madness of forced austerity, our economy was limping.
Is it possible the hat is out of rabbits?
Very Interesting, but one wonders the veracity of the piece. Being a fiscal liberal, and, as much as I would like to blame all of the world’s economic woes on Republican Richard Nixon, it seems a stretch. With everything we already know about Richard Nixon, this article transforms him from simple crook, to the Devil personified! You know, we really don’t have Nixon to kick around anymore.
I think an investigative piece into this allegation is warranted and I await such effort before passing judgment. My God, just think of the implication!
Thanks for the link, Patrick.
Though the degree to which Nixon is responsible for the economic misfortunes following his presidency is debatable, the article points to an important point in American history.
I am amazed by how seldom monetary policy comes up in political discussions. Politicians and pundits are constantly talking about how fiscal and regulatory policy affects the economy, but few bother to even mention monetary policy–let alone explain how it affects the economy. Ron Paul is the only politician that I know who discusses monetary police–though I don’t have the economic acument to properly the evaluate the rightness or wrongness of his position (he favors returning to a commodities-backed currency–not the pseudo-Gold Standard of Bretton Woods).
We had inflation before 1971. Certainly it can be argued that Nixon helped make things worse by giving the feds more power.
There have been publications about those times, as well as in those times like at least one newspaper or magazine’s published book in the 1960s about it (Time, Newsweek, or New York Times, I believe).
Here’s Samuelson, about the phenomenon. Note that there’s a bonus of a kind, in his Introduction: He wrote it as the mid-late slump, with a sharp oil price shock, had begun, and he was concerned at that time about inflation. It’s not exactly the same set of circumstances now, but we’re right to worry about future inflation if the “quantitative easing” doesn’t itself ease, or if we get another oil shock, or if we devalue our currency, etc.
http://books.google.com/books?id=PrgvjwD1q_gC&lpg=PP1&pg=PP1#v=onepage&q&f=false
We finally licked inflation in the early 1980s, broke its back. Do we really want to go back to it, to monetize debt or just buy cheap votes (of cheap voters)?
DLS-
You just can’t take it that you cannot blame the massive inflation during the eighties on Carter. We have all known that it came from Nixon and was frustrated even further by your God Reagan. Republicans have really screwed up this country with their greed and corruption.
You have NO argument lol.