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Richard M. Nixon Analysis

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Short-Term Catalysts In his first year as president, Richard M. Nixon faced a recession that started in December, 1969 and ended in November, 1970. Consequently, to stimulate the economy with eyes on the 1972 presidential election, Nixon wanted an expansionary monetary policy. To this end, he pressured the Federal Reserve chairman Arthur F. Burns directly and indirectly using Office of Management and Budget Director George Shultz. Burns eventually adopted the expansionary monetary policy by loosening credit. Subsequently, this resulted in short-term notes investors going abroad for a better interest rate further placing pressure on the dollar. Moreover, the continued speculation of the dollar on the international monetary markets led the…show more content…
While some disputed over the validity of this British intent, with the gold reserves under $10 billion, a $3 billion rumored imminent conversion request placed the Bretton Woods into a liquidity crisis. A memorandum from the Acting Assistant Secretary of State for Economic Affairs, Julius Katz, to the Secretary of State William P. Rogers dated August 13, 1971 depicted the dollar in a clear distressed. For instance, Katz indicated that the dollar was severely overvalued in Europe and Japan financial markets. Furthermore, the central banks in these markets were in need of purchasing enormous amount of dollars to keep their reserve requirements. Accordingly, there was widespread speculation on an impending devaluation of the dollar. On this same day, President Nixon, a group of cabinet officials, economic advisors and political aides headed for the weekend summit at Camp David to address the ongoing dollar crisis. The conclusions stemmed from the weekend summit shaped the new economic policy announced by President Nixon on August 15, 1971, which became the Nixon shock. Although, the immediate goals of the Camp David summit were to address dollar crisis and the stability of Bretton Woods, the resulting new economic initiatives were the product of the summit participants and their deep rooted thoughts and
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