Gold, the Dollar and Watergate : How a Political and Economic Meltdown Was Narrowly Avoided

"In January 1969 as the President Richard Milhous Nixon pledged to make the United States a calmer place, foster peace in the world and strengthen America's position in the world, damaged by the conflict in Vietnam. While Nixon's first priority was ending the War, the economy and the international position of the dollar also required attention. However, the 1970s turned out to be a unique period in history, with the convergence of three crises, each carrying its own dangerous load, but in combination posing a unique political and economic threat to global stability. The Vietnam War turned out to be much costlier than originally envisaged, and as its trading partners posted lower rates of inflation, America was losing its competitive edge. It was frequently running deficits on its overall payments, while European countries were in surplus and accumulating dollars. This led to the gold-dollar crisis. In contrast to the years of dollar scarcity after the Second World War, Europeans no longer wanted to add to their dollar reserves. In addition Nixon also had to tackle the fourfold increase of oil prices in 1973. As evidence came to light on the Watergate scandal, Nixon was losing the confidence of the American public, and foreign investors and politicians. The book examines the problems that Nixon faced during his presidential term, focusing on economics but also the impact of political decisions where they influenced or determined monetary and fiscal policy."-- Provided by publisher Title 4 Copyright 5 Contents 6 List of Figures 8 Preface 10 Acknowledgements 14 Introduction 16 Part I Gold 22 1. A unique metal 22 Monetary gold 24 The golden fleece 24 A brief bout of bimetallism 26 2. The gold standard 27 Britain leads the way 28 The golden age 29 The gold bullion standard 30 3. Gold loses its luster 31 Back to normal? 31 The gold exchange standard 33 Breaking out of the golden cage 35 A rude shock 36 Reverse gold rush 37 Setting the gold price 38 Dollar devaluation 38 4. War chest, war loot 40 Building a war chest 40 War loot 42 Gold raids 43 The Dutch experience 44 5. Yellow and green 46 The odd couple 46 A remarkable achievement 48 Sharing the pie 49 The education of a POW69 50 Stalin pulls back 51 Part II The Dollar 52 1. The mighty greenback 52 Europe devalues 53 The IMF takes off 54 Jacobsson takes over 54 Cutting-edge research78 55 2. From dollar famine to flood 56 An Atlantic citizen80 57 The Triffin dilemma 58 The dollar under attack 58 The gold pool85 59 Palliatives 60 A rich man’s club 61 Emptying Fort Knox 62 The president speaks 63 From Frost to Fowler 64 3. Working toward a compromise 65 Floating as a fix 66 A matter of prestige 67 Getting serious 68 In a boat with an elephant 69 Successful cooperation113 70 The invention of paper gold 71 A great moment in history? 72 Toil and trouble 73 Bizarre in Bonn 74 French faux pas 75 The U.S. versus the rest 76 4. Change of the guard 77 Assembling a team 78 A mixed bag 78 All the president’s men 79 Monetary point man134 81 A pragmatist 82 5. Nixonomics 83 A mismatch 85 An early setback 86 Marking his territory 87 Getting acquainted 88 A black sheep 89 6. Showing his dark side 90 Political economics 91 A sage at the fed 92 Nixon’s helper? 93 Unholy trinity 95 7. Texas hold ’em 96 Spunky character 97 Benign neglect 98 Getting physical 100 No monetary magic 102 Dark horizon 102 8. Floating rudderless 103 Breaking the rules 104 Volcker plans ahead 105 Take that 106 Japanese jitters 108 The writing on the wall 109 Rocking the boat 109 Impending doom 110 9. Closing the window 111 A mountain of greenbacks 112 Conspiracy at Camp David 113 Burns balks 114 Burns backs off 116 A masterly performance 117 U.S. happy, Europe sad 118 Salesman Connally 119 Nixon shock 120 10. Monetary diplomacy 122 A stroke of the pen 123 Advocating devaluation 124 Keeping it in the G-10 125 Posturing and leaking 127 Parleying and partying 128 Bad chemistry 130 Covert action 130 Crunching numbers 132 Changing fortune 133 John Connally, actor 135 Letting the cat out of the bag 137 Japan in the dark 137 It’s your problem 139 Eyes glazing over 140 11. Building an air castle 140 Turning up the heat 141 Not impartial 142 Fight and flight 143 Making world history? 144 Selling the settlement 145 The crisis returns 146 A European snake 148 12. Nixon triumphant 149 Let’s make a deal 150 In the saddle again 151 Shultz versus Burns 152 Who cares? 153 Economy and election 153 A third-rate burglary 154 The mysterious Deep Throat 155 Foreign policy to the fore 156 Connally: political advisor 157 Fighting cancer 158 Inflation on the rise 159 The flying U-boat 160 Chez Giscard 161 A third devaluation? 162 From dirty to managed floating 163 13. Money masters 164 Steady Shultz 165 A paradoxical patrician 166 A charismatic chancellor 168 Part III Watergate 170 1. Escalation 170 A treasure trove 171 Executive privilege 172 2. War and oil 173 A game of chicken 175 Oil as weapon 176 Price quadrupled 176 Complacent no more 178 3. Recycling 179 A Keynesian with a twist 181 A sufi at the helm 182 A most pleasant conference 184 Brainwave 185 Washington wavers 186 Getting the United States on board 187 4. No rest for the wicked 188 Saturday night massacre 188 Ford’s the man 189 I am not a crook 190 Fighting on 191 Installing a czar 192 5. The scourge of stagflation 193 Dealing with the fallout 194 No roadmap 194 Stimulate, or disinflate? 195 Tokyo’s troubles 196 The German icebreaker 197 Taking a different route 198 Their worst hour 199 Galloping inflation 200 Nixon impresses 201 6. A Middle Eastern odyssey414 202 Persian petrodollars 203 Arabian days 204 More fundraising 205 A raft of borrowers 207 Trade pledge 207 Keeping their shirts on 208 7. Down to the wire 209 Republican defection 210 The road to impeachment 211 Looking for the smoking gun 213 Travel escapism 214 A pain in the leg 215 8. The recession bites 216 The Fed blindsided 217 Franklin goes belly up 218 The Fed tightens 219 Inflation as diversion 220 The recession goes global 220 9. Nixon’s last stand 221 Acts of desperation 222 Giving up the smoking gun 224 How to end it 225 Vietnam on his mind 226 The final push 229 Part IV Ruin Or Revival? 230 1. Searching for stability 230 The economy tanks 230 Whip inflation now 232 Cooperation to the rescue 233 Green shoots 233 Avoiding a currency war 235 Dead end 236 Ceasefire 236 Floating circumscribed 237 American–French breakthrough 238 Closing the deal 239 Lifting the veil 240 Major reform or fiasco? 242 2. Stimulate or deflate? 243 Britain waives the rules 244 Merry-go-round economics 245 The IMF goes undercover 246 Trench warfare 247 GATT and all that 248 Opera buffa 249 No holiday 250 3. Talking down the dollar 252 Carter takes over 252 Keynes returns 254 Schmidt balks 254 Misreading markets 255 A sputtering locomotive 256 A costly lesson 257 The diving dollar 257 Trying to calm the waters 260 Passing the baton 261 Inflation infection 262 Carter in limbo 262 A strong package 263 Second oil crisis 264 Bringing in Volcker 265 Europe: health and sickness 266 Rising star 267 4. The dragonslayer 268 Volcker’s coup 270 Playing the political card 271 Tough love 272 Carter bows out 272 Dealing with Reaganomics 273 The final thrust 274 Notes 276 Bibliography 290 Index 298 The book examines the problems that Nixon faced during his presidential term, focusing on economics but the role of politics is also highlighted. The convergence of the gold-dollar crises, oil crises and Watergate imbroglio posed a unique political and economic threat to global stability. In January 1969 as the President Richard Milhous Nixon pledged to make the United States a calmer place, foster peace in the world and strengthen America's position in the world, damaged by the conflict in Vietnam. While Nixon's first priority was ending the War, the economy and the international position of the dollar also required attention. However, the 1970s turned out to be a unique period in history, with the convergence of three crises , each carrying its own dangerous load, but in combination posing a unique political and economic threat to global stability. The Vietnam War turned out to be much costlier than originally envisaged, and as its trading partners posted lower rates of inflation, America was losing its competitive edge. It was frequently running deficits on its overall payments, while European countries were in surplus and accumulating dollars. This led to the gold-dollar crisis. In contrast to the years of dollar scarcity after the Second World War, Europeans no longer wanted to add to their dollar reserves. In addition Nixon also had to tackle the fourfold increase of oil prices in 1973. As evidence came to light on the Watergate scandal, Nixon was losing the confidence of the American public, and foreign investors and politicians. The book examines the problems that Nixon faced during his presidential term, focusing on economics but also the impact of political decisions where they influenced or determined monetary and fiscal policy