Coined: The Rich Life of Money and How Its History Has Shaped Us by Kabir Sehgal

Author:Kabir Sehgal
Language: eng
Format: epub
Tags: Business & Economics / General
Publisher: Grand Central Publishing
Published: 2015-03-09T16:00:00+00:00

If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. The effect of this action, in other words, will be to stabilize the dollar.130

His policies became known as the “Nixon Shock” among international trading partners who were surprised by US protectionism. The onerous 10 percent tax acted like an immediate devaluation of the dollar. In response, Japan floated the yen, which appreciated 7 percent versus the dollar, resulting in a dramatic 17 percent increase in the price of Japanese goods sold in the United States, factoring in Nixon’s 10 percent tax.131 In America, the stock market surged and the press applauded Nixon’s measures: “We unhesitatingly applaud the boldness with which the President has moved,” stated an editorial in the New York Times.132

Despite the creation in December 1971 of a new international monetary system known as the Smithsonian Agreement, which reprised a system of fixed exchange rates, it didn’t last, as the United States and other countries wanted more monetary policy flexibility when confronting domestic issues. By 1973, many currencies of the industrialized economies started to float against each other. Bretton Woods was dead. Gold was gone for good. The dollar was and remains soft. Economist Benn Steil notes the significance of these events:

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