Dear gnossie-ga,
There was some speculation and some advance warning in a Congressional
Report, but it still came as a surprise.
By August 1971, confidence in the stability of the dollar had been
badly knocked by the high level of U.S. inflation, high wage
settlements, and balance of payments deficit. There was a major run on
the dollar and dollars were sold for European currencies. According to
a memorandum from the Acting Assistant Secretary of State for Economic
Affairs (Katz) to Secretary of State Rogers, "impressive sums are
moving speculatively, betting that the dollar will be devalued."
In the second week of August, the Chairman of the Joint Economic
Committee on Exchange and Payments, "released a report which:
--suggested that the dollar was overvalued and should be allowed to
"float" downward in value.".
It is behind this background that President Nixon met with a number of
his economic advisers and three members of his White House staff at
Camp David to discuss the options. Nixon decided to take drastic
measures and go the whole way instead of piecemeal by announcing on 15
August suspension of the gold convertability and other economic
measures.
As Nixon acknowledged in his speech to the Nation, speculation and
speculators had been busy.
"In recent weeks, the speculators have been waging an all-out war on
the American dollar. The strength of a nation's currency is based on
the strength of that nation's economy--and the American economy is by
far the strongest in the world. Accordingly, I have directed the
Secretary of the Treasury to take the action necessary to defend the
dollar against the speculators.
I have directed Secretary Connally to suspend temporarily the
convertibility of the dollar into gold or other reserve assets, except
in amounts and conditions determined to be in the interest of monetary
stability and in the best interests of the United States."
Only available through Google cache
http://66.102.9.104/search?q=cache:F0aTcVnkMOsJ:www.presidency.ucsb.edu/site/docs/pppus.php%3Fadmin%3D037%26year%3D1971%26id%3D264+%22+i+am+taking+one+further+step+to+protect+the%22&hl=en
The other quotes above can be found in the orginal documents from that
period and the editorial remarks for the Department of State records:
Foreign Relations, 1969-1976, Volume III, Foreign Economic Policy,
1969-1972; International Monetary Policy, 1969-1972
http://www.state.gov/r/pa/ho/frus/nixon/iii/5348.htm
http://www.state.gov/r/pa/ho/frus/nixon/iii/5342.htm
As for the World?s reaction, I have found these comments:
U.S. Foreign Economic Policy and Relations with Japan, 1969-1976
Thomas W. Zeiler
"Protectionism and shutting of the gold window stunned United States
allies, particularly Japan."
http://www.gwu.edu/~nsarchiv/japan/zeiler.htm
The Times Newspaper (UK) 16 August.
"Rather than introduce corrective measures in piecemeal fashion they
have taken the nation?s, and indeed the world?s financial markets?
breath away with the drastic measures which have exceeded the most
adventurous forecasts. Indeed for the amount of surprise it has caused
in the conomic world, President Nixons? speech tonight is even more of
a surprise than his announcement of a vist to communist China was to
the diplomatic wolrd. The suspension of gold convertability is perhaps
the most drastic step of all"
"Toyko Monday ? Japenese officials and financiers were shocked by the
suspension of the American pledge to convert dollars into gold. ?We
are in a state of turmoil? one official said."
Source
Through my library.
A search of the NY Times archive produces the following headlines (you
have to pay to view the articles)
"Gold Troubles; Troubles Over Gold
Aug 1, 1971.
PARIS -- It's not whether it would happen, but when. This was the way
many European authorities were talking about devaluation of the
dollar."
"DEVALUED DOLLAR IS ASKED IN STUDY; Congress Unit Sees Benefits in
Jobs and Trading, but Treasury Assails Data DEVALUED DOLLAR IS ASKED
IN STUDY
Aug 8, 1971.
WASHINGTON, Aug. 7 -- A Congressional subcommittee said today that the
United States dollar is "overvalued" in relation to other currencies
and urged that, one way or another, it be devalued."
"Speculative Attacks Grow On U.S. Currency Abroad; Nervous Foreign
Dealers Sell Dollars as Federal Reserve Bolsters Monetary Defenses
With a Swap Deal PRESSURE ABROAD ON DOLLAR GROWS
Aug 13, 1971.
The United States dollar was under speculative attack in world money
markets yesterday. In Frankfurt, Milan, London, Zurich, Amsterdam and
Tokyo, among other major financial centers, the pressure was heavy as
nervous traders sold dollars and sought local currencies."
"EXCHANGES IN TOKYO UNLOADING DOLLARS
Aug 16, 1971.
TOKYO, Monday, Aug. 16 (Reuters) -- The Tokyo exchange market was
thrown into confusion today following reports that the United States
had suspended its pledge to convert foreign-held dollars into gold."
"Pressure by Speculators Forced Action on Dollar
Aug 16, 1971
President Nixon's announcement last night that effective immediately
the United States would suspend settlement of international
transactions in gold came in the wake of a week of intensive
speculative selling pressure against the dollar in the money-market
centers of Europe."
"MOST WORLD CURRENCY DEALING IS HALTED; EUROPE IS JOLTED Stocks Abroad
Fall -- Tokyo Seeks to Hold Yen-Dollar Parity Official Currency
Trading Halted, Except in Tokyo
Aug 17, 1971.
PARIS, Tuesday, Aug. 17 -- Europe and Japan reacted with anxiety and
confusion to President Nixon's radical economic measures, as officials
were summoned back from August vacations for consultations on what to
do."
This link should take you to other articles.
http://pqasb.pqarchiver.com/nytimes/results.html?st=advanced&QryTxt=dollar+gold+&x=34&y=10&By=&Title=&datetype=6&frommonth=08&fromday=01&fromyear=1971&tomonth=12&today=31&toyear=1971&restrict=articles&sortby=REVERSE_CHRON
I hope this answers your question. If it does not, or the answer is
unclear, then please ask for clarification of this research before
rating the answer. I shall respond to the clarification request as
soon as I receive it.
Thank you
answerfinder
Search strategy
News databases and various on Google of nixon august 16 1971 gold
dollar speculation devaluation |
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