Nixon Shock
Categories: Econ
Inflation, inflation, inflation...ow. What was that?
The Nixon shock, a bunch of economic measures that were implemented all at the same time in 1971 by President "Not a Crook" Nixon to stop inflation from growing.
Just what did Nixon do to shock the economy? Prices: frozen. Wages: frozen. Imports: will cost ya. Sounds scary...maybe you should exchange your U.S. dollars for gold, just in case. Nope, can’t do that now, either.
The Nixon Shock is particularly known for taking a smiley-face dump on the Bretton Woods system of international finance exchange, which the U.S., Canada, Australia, Japan, and much of Europe all agreed to in the 1944 Bretton Woods Agreement. The agreement was an impressive feat, getting all these countries to agree to fix their exchange rates and prevent competitive devaluation of each other’s currencies. The Nixon shock didn’t directly address this system, but it did blatantly disregard it, which ultimately led to it dying on the vine.