The Nixon Shock Revisited
The world has an interesting anniversary coming up.
When France agitated for the gold they were owed* in exchange for the dollars they held, it began a trend that soon made it obvious to the world that the U.S. already held less gold than the gold-backed dollars in global circulation claimed. As a result, the prestige of the dollar was damaged, and its value declined.
The risk to U.S. living standards led, on August 15, 1971, to then-President Richard Nixon refusing to honor England’s request to exchange her dollars for gold. Officially, the U.S. “gold window” was shut: the U.S. would no longer permit foreign countries to exchange their excess dollars for real money.
Effectively, we defaulted on our obligation to back dollars with real money. That liberated the printing press, eventually producing the social media “money printer go brrr” meme we now know too well.
So, how has the Nixon-era policy aged? It depends on who’s being asked. (Although the “money printer go brrr” meme’s popularity and many iterations says it all.) It’s been great for the 0.1%, pretty good for the 1%, and not bad for the 10%, but not good at all for the rest of us.
The website, WTFhappenedin1971.com, shows the effects of the Nixon Shock on the nation and world in a collection of interesting and sad graphs.
*edited and corrected thanks to observation by @MGRS
So I’m being a pedantic naval nerd here, but as far as I know, the French had no battleships in 1965.
Curious about the incident, as it sounds… seriously diplomatic.
edit: I’m just being a historical nerd here, as it seems like it would be cool to find pictures of said ship (more than likely a cruiser or destroyer) sitting in NY harbor, with the implied seriousness it entails. Very meme-able. A few minutes of searching hasn’t turned up much.
You know, @MGRS, that’s a really good point. It sent me searching, too. The oldest (and nearly only) citation I can find for this “fact” I’ve known for so long, and heard repeated several times, comes from a 2014 article by Charles Kolb, posted in HuffPo.
A growing number of countries began to redeem their dollar holdings for gold.
France sent a warship to New York harbor in early August 1971 with instructions to bring back its gold from the New York Federal Reserve Bank. It was, after all, French President Charles de Gaulle who remained consistently skeptical about the US dollar…
Not what I’d call credible. And, besides, I thought it was in February. And back in 1965.
Thanks for voicing the quibble. It’s always good to have our certainties challenged when we fail to do so ourselves.
Naval nerd away!
Yay for primary sourcing (or lack thereof)! This would be a cool story to turn some of the youtube naval historians (Drachinifel’s channel is great) loose on and see what they find.
Best I’ve found is that the French had two battleships left by the 1960’s – Richelieu and Jean Bart, both of which were sitting in inactive status awaiting their appointments with the scrapyard in the 1970’s.
Also, de Gaulle left office in 1969, and died in 1970. So by August 1971 it was Pompidou running the show.
Hey, @MGRS, a bit of trivia:
I thought I’d found confirmation of the French battleship in NY harbor when I watched a short movie today about the rise of the petrodollar, which referenced it (1971 date). That sent me to the article the movie illustrates, and it referred me to a scholarly article from Columbia Law School, faculty written no less. I dutifully read it: sure enough, on page 18 the claim is repeated — but no sourcing is provided.
It was a fun few minutes while the pressure cooker processed quarts of home-canned beef, but I am now quite convinced it’s urban legend. I do wonder where it started.