Nixon Shock (Part I): Why Richard Nixon torpedoed the global monetary system | The Story of Money

A century ago, when depositors lost confidence in a bank, they’d rush to withdraw their cash. In 1971, US president Richard Milhous Nixon faced a similar dilemma. But his problem wasn’t ordinary citizens fearing for their savings. Instead, it was America’s closest allies who were nervously eyeing the dwindling supply of gold in Fort Knox at a time when the dollar’s value was tied to gold and allies’ currencies were in turn tied to the dollar. And just like a beleaguered bank manager of yore, Nixon chose to shut America’s doors to further withdrawals. His decision threatened to pull the plug on the entire international monetary system established at Bretton Woods in 1944. It was so unexpected and outrageous, it became known as the “Nixon Shock”. In the first of two episodes on the topic, hosts Gillian Tett and Robin Wigglesworth get the story from economist and ex-financier Jeffrey Garten – a man with a CV so long that he once even worked for the Nixon administration himself. Further reading: Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy, by Jeffrey E Garten (2021) Gold and the dollar crisis, by Robert Triffin (1960) Credits: Getty Images, the Richard Nixon Presidential Library To enjoy future episodes, be sure to subscribe to The Story of Money wherever you get your podcasts, also on the show's dedicated YouTube channel here:    / @ftthestoryofmoney   Hosts: Gillian Tett and Robin Wigglesworth Producer: Laurence Knight Executive Producer: Manuela Saragosa Original music: Breen Turner Broadcast engineers: Bianca Wakeman and Petros Gioumpasis Podcast Development: Laura Clarke Video editor: Kristen Kenyon and Josh Divney at Podcast Discovery Learn more at www.ft.com/tsom or get in touch at [email protected]. Chapters: 0:00 - Introduction 1:43 - Stagflation, inflation, and Nixon’s new economic policy 2:21 - The “Nixon Shock” and the threat to the Bretton Woods system 3:51 - Introducing the story and why the decision still matters today 4:54 - Guest introduction: Jeffrey Garten and his Nixon-era experience 7:14 - How Bretton Woods made the dollar the center of the global monetary system 11:21 - Growing strains beneath Bretton Woods’ postwar success 12:25 - The gold shortage problem and fears of dollar redemption 15:17 - Trade deficits, Vietnam spending, and rising inflation 17:27 - The Triffin Dilemma and the global demand for dollars 19:15 - International speculators and the rise of the Eurodollar market 22:09 - Early attempts to defend the dollar before Nixon 24:16 - Nixon takes office amid a worsening dollar crisis 25:10 - Nixon’s political background and leadership style 28:38 - Why Nixon wanted to reform Bretton Woods, not destroy it 30:03 - “Benign neglect” and growing tensions with allies 31:41 - Burden-sharing, trade imbalances, and disputes with Germany and Japan 34:30 - The 1971 currency panic and pressure on the dollar 36:02 - Gold withdrawals, allied concerns, and fears of collapse 38:30 - America’s first merchandise trade deficit and the looming crisis 39:05 - Cliffhanger: what happens next to Bretton Woods and the dollar?