The rest of the world saw the U.S. money printing under the dollar/gold exchange standard, and noted the falling purchasing power of the dollars they held.
They began to race for the exits. They wanted to cash their paper dollars in for gold while they could.
On just one day in March 1968, dollar holders lined up to cash in their paper money and took 400 tons of gold off America’s hands. By 1970, the U.S. had only enough gold to cover 22 percent of the dollars held by foreign central banks.
Like a run on the bank, the demand to exchange dollars for gold was beyond containment.
It was a Sunday night when Nixon went on national television to announce his strangely Soviet-sounding “New Economic Plan.”
It was a ham-handed attempt to hide what was being done to the dollar’s purchasing power, freezing prices by governmental edict.
The price controls led to their own unhappy chain of consequences beginning with empty shelves in the stores and spreading shortages. Eventually the broad fixing of consumer prices was lifted, and goods returned to the shelves, although at much higher prices.
Thursday, August 14, 2014
The Dollar Anniversary
A very nice article marking Nixon's decision to take the dollar off of the gold standard, in addition to implementing wage and price controls.