Nixon Shock, the Reserve Currency Curse, and a Pending Dollar Crisis, by Mish Shedlock | STRAIGHT LINE LOGIC
On August 15, 1971 Nixon directed 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. He also issued Executive Order 11615, imposing a 90-day freeze on wages and prices in order to counter inflation. This was the first time the U.S. government had enacted wage and price controls since World War II.
The American public believed the government was rescuing them from price gougers and from a foreign-caused exchange crisis. Politically, Nixon’s actions were a great success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, “We unhesitatingly applaud the boldness with which the President has moved.”
So Much for Temporary
In contrast, Paul Krugman said a country “can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system.”