The Nixon Shock: Connally’s Bold Move (Part 3)

A run on the dollar, stagflation, and an election on the line—Part 3 wraps up the series with President Nixon’s shocking announcement to shut the gold window… a move that changed the monetary system forever and signaled the beginning of the end for the perception of gold as money. We meet John Connally, the swaggering Democratic governor of Texas who rode in the car with JFK when he was shot, and later became Nixon’s Treasury Secretary. He was the political closer tasked with averting a global monetary crisis and more importantly, securing Nixon’s re-election in 1972.In the summer of 1971—with inflation rising, unemployment hovering near 6%, and foreign central banks suggesting they might convert dollars into gold—Connally, only months into the job, worked with Paul Volcker and others on a plan to fix the economy.During an intense weekend at Camp David, Connally orchestrated consensus around a plan that included wage and price controls, a 10% universal tariff on imports, and most importantly, the suspension of dollar-gold conversion. These policies were sold as temporary and forced a global realignment.At 8:00 p.m. ET on Sunday, August 15, 1971, Nixon announced the New Economic Policy to the world and kicked off a series of events that led to the monetary system we have today.Chapters(00:20) Connally’s 4 No’s Speech(02:00) Gradualism & Stagflation(04:26) Whispers of Global Monetary Crisis(05:52) The Nixon Doctrine(07:30) Introducing John Connally Jr.(14:18) How Connally Gets on Nixon’s Radar(15:47) Moving Away from Gradualism(17:27) The Potential for a Run on the Dollar(24:50) Camp David Economic Meetings Coordinated by Connally(30:05) The British Allegedly Want to Redeem $3 Billion in Gold(33:07) Policy Change Decisions at Camp David(39:23) Nixon’s Speech Shutting Gold Window(40:15) The Immediate Domestic Reaction of the Speech(42:39) The Foreign Reaction to the Speech(46:08) Smithsonian Agreement in December 1971(47:56) By March of 1973 Bretton Woods Is Dead(49:30) Why Did We Not Have Another Bretton Woods Agreement?(52:10) Similarities and Differences to What’s Happening TodayReferencesThree Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy by Jeffrey E. Garten (link)Nixon's Economy: Booms, Busts, Dollars, and Votes by Allen J. Matusow (link)https://wtfhappenedin1971.com/ This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com