Broken Promises—The Unhappy 40th Anniversary of the Nixon Shock

Today is the 40th anniversary of the announcement by President Nixon of a New Economic Policy, the so-called “Nixon Shock.”

President Nixon, faced with rising inflation and the threat of a recession, imposed wage-price controls, built a tariff barrier around the USA, and “temporarily” suspended the convertibility of the dollar into gold.

It was, by results, the greatest debacle in the history of American economic policy.

What followed was not pretty. All of the Nixon Shock policies, save one, were quickly unwound by his more economically astute senior policy makers. The tax credits expired. Wage-price controls were allowed to implode. The tariff wall came down faster than you can say, “Mr. Nixon, tear down this wall!” All were unwound, that is, except one.

The only vestige of the Nixon Shock remaining was, arguably, the most damaging and it is still doing great damage.

The gold window is still closed.

The gold standard has a long and colorful history.

For all of its imperfections what cannot be disputed seriously is that, notwithstanding its bungled handling from time to time, the record demonstrates that the gold standard is, as financier and philanthropist Lewis E. Lehrman (with whom this writer is professionally associated) has observed, the least imperfect of all monetary systems that have ever been tried in the laboratory of history.

Why is it the best? Yes, it has a distinguished pedigree going back to Sir Isaac Newton and even Copernicus, and was firmly embraced by America’s founders. But that’s not why. The reason is simple. The gold standard is one of the greatest engines of job creation and real prosperity known.

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