1971 - : Nixon policy led to recurring crises of inflation, oil price and currency shocks (1 ottob 1971 anni – 1 giug 2050 anni)

Descrizione:

The Nixon Shock followed President Nixon’s televised New Economic Policy address to the nation. The crux of the speech was that the U.S. would turn its attention to domestic issues in the post-Vietnam War era. Nixon outlined three main goals for the plan:

Creating better jobs
Stemming the rise in the cost of living
Protecting the U.S. dollar from international money speculators.
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Nixon cited tax cuts and a 90-day hold on prices and wages as the best options for boosting the job market and tamping down the cost of living. As for speculative behavior toward the U.S. dollar (USD), Nixon supported suspending the dollar’s convertibility into gold...
Initially, the Nixon Shock was widely praised as a political success. Today, however, the long-term benefits of the Nixon Shock are a matter of scholarly debate.

First, Nixon's actions were the primary catalyst for the stagflation of the 1970s. It also led to the instability of floating currencies, as the U.S. dollar sank by a third during the 1970s. Over the past 40 years, the U.S. dollar has been anything but stable, with several periods of severe volatility.

From 1985 to 1995, for example, the U.S. dollar value index lost as much as 34%. After quickly recovering, it fell sharply again from 2002 to mid-2011.
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Nixon also promised that his move would prevent costly recessions. Over the past few decades, however, the U.S. has suffered severe recessions including the Great Recession of December 2007 to June 2009.

Advantages and Disadvantages of the Nixon Shock

Today, we live in a world of mostly free-floating, market-traded currencies.

This system has advantages, especially in terms of making radical monetary policy such as quantitative easing (QE) possible. Central banks now have a greater degree of control over their own money, making it easy to "manage" variables such as interest rates, overall money supply, and velocity.

On the other hand, Nixon's move also created uncertainties and led to a massive market based on hedging the risks created by currency uncertainty. The financial crisis of 2007-2008, in particular, proved that central bank control is no guaranteed defense against severe recessions.

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