Bretton Woods and the Financial Crisis of 1971 (B)

Description

In August 1971, US President Richard Nixon must decide how to respond to a growing “run” on the US dollar. Declining confidence in the dollar has led some national trading partners to redeem dollars for gold at the US Treasury’s gold window. Nixon has convened an urgent conference with his economic advisers at Camp David to consider a response. The two dominant policy alternatives are (a) gradual intervention proposed by central banker, Arthur Burns; and (b) “shock treatment” (devaluation of the dollar by abandoning the commitment under the Bretton Woods Agreement to convert dollars into gold at the rate of $35/ounce) proposed by Treasury Secretary John Connally. The task for the student is to assess the situation and recommend a course of action. This B case, which has been taught successfully in Darden in-person and online classes, gives the text of Nixon’s 1971 address outlining his New Economic Policy.

Related Documents

• Bretton Woods and the Financial Crisis of 1971 - Teaching Note

Keywords

Arbitrage bancor Bretton Woods capital flight currency devaluation currency exchange rate Distance learning gold standard gold window Great Depression Harry Dexter White impossible trilemma International finance International Monetary Fund John Maynard Keynes Lyndon Johnson Monetary policy multilateralism New Economic Policy Nixon shock online Richard Nixon Triffin dilemma