Jeffrey Tucker argues Richard Nixon’s 1971 Nixon Shock—abandoning the gold standard and imposing wage/price controls—sparked decades of inflation, eroding savings and fueling big government. The move, despite Nixon’s later regret, destabilized Bretton Woods, leading to double-digit inflation by the '70s. His populist policies, like the EPA, and media hostility (echoing Trump’s era) stemmed from leftist backlash over Vietnam and China/Russia diplomacy, masking deeper economic failures. Ultimately, Nixon’s legacy reveals how well-intentioned leaders can unintentionally reshape economies toward crisis. [Automatically generated summary]
So he's dealing with this in 1971 alongside innumerable political problems for himself.
And so he went to his advisors and said, what can we do?
And really, there were two choices.
You could deflate, cut the budget, live within your means, which could probably provoke a recession and tank Nixon's popularity.
Or you could just make an announcement.
No more gold exchange.
The U.S. is shutting the window.
I think it was August 15th, 1971.
It's called the Nixon shock for a reason, because the last president you would have expected to untie the dollar from this last tenuous link to gold would have been a Republican president.
Well, so now what happens after that?
Well, again, the most horrifying thing you could ever imagine, which he imposed wage and price controls.
So under penalty of law, nationwide wage and price controls to prevent inflation that would inevitably result from a shutting of the gold window.
I'm Dave Rubin and joining me on this President's Week to discuss former President Richard Nixon is the founder of the Brownstone Institute and Rubin Report regular Jeffrey Tucker.
And I feel like when you're in the drawing room at Downton Abbey over there, now I know what's going on at the Brownstone Institute.
All right, let's dive in.
Let's talk about Richard Nixon.
Actually, out of all of the president's week shows that I'm doing, you know, we're doing a bunch of the founders and some of the more modern Trump and all that sort of thing.
But I feel like Nixon is the one that people sort of think they know in some sort of comically villainous way, but maybe don't really know or only have the image of him in the debate with JFK.
You know, I should say Nixon was kind of the beginning of my political awareness because the very first political thing I can remember is Watergate.
It took over the country.
My grandparents just watched it constantly.
Why were they watching?
Were they able to follow all this stuff?
These endless wall-to-wall hearings lasted weeks, months.
I'm not sure they could figure it out, but it was this big scandal of the time.
My father was always a Nixon fan.
So I don't remember the details, but he just liked Nixon.
And I remember being very young, like in one of those, you're going to be astonished to hear this, but I was in elementary school and we had like a propaganda newspaper for kids.
It was like the Washington Post, except marketed to third graders.
Yeah, I'm sure that even regular Washington Post readers couldn't read the edition I was reading in third grade.
But it had this bent, you know, so even in those days, everybody knew who was who.
It was kind of like Team Red, Team Blue.
You know, I think we called it liberal conservative, whatever.
But the teacher wanted to know who in the classroom after the Watergate thing, who in the classroom supported Nixon and who didn't.
And she started with who didn't.
And everybody in the whole class raised their hand and said, who did?
And I was alone.
I was the only kid in the class raised my hand and said, I support Richard Nixon.
That's literally my very first memory.
I have no idea why I supported Richard Nixon.
It was like a ton of time.
Yeah, I don't know why.
But I was like, no, no, Nixon's a great guy.
He's getting a bum wrap.
I couldn't have filled in any details beyond that.
But I think actually a lot of subsequent research has thrown a lot of sort of doubt on whether or not this was really, you know, the Washington Post, intrepid reporters holding government officials' feet to the fire on behalf of a public and its right to know.
So we use this word sometimes in political analysis called triangulation, which is that you're able to get away with things because people don't expect you to do them, right?
So triangulation, he was the master of it.
So he was an anti-communist.
That was his history.
He was, I think, the Senate interrogator of the Hiss Chambers trial, kind of grafted onto the McCarthyite movement.
But it was he who opened up China as a way of creating a sort of counterweight to Russia and dividing China and Russia's interest vis-à-vis the United States.
So that's a brilliant move.
They say that Nixon went to China because nobody expected that this is the last thing you would expect that he would do.
But he gained so much success from that.
He kept doing this, right?
So one wonderful thing is that he actually was very instrumental in putting an end to the Vietnam War, which is a beautiful thing.
Wasn't a warmonger in that sense, but he was a big regulator.
He was created the EPA, which is another thing you would not have expected.
He might have had a lot of internal convictions, but those internal convictions did not translate into public policies.
He considers, he always considered high poll numbers to be sort of a ratification that he did the right thing, even when he was doing the wrong thing.
So now, Dave, we have to get to the most serious and significant thing he did during his entire presidency, which was to close the gold window and take the dollar off the gold standard and, in effect, the entire world economy off the gold standard.
So just to review here, why this is so important.
So a fiat money system with a roiling, boiling international market between arbitrage market, between currencies that's such a source of fanaticism in the world economy today.
I mean, this is trading currencies is such a big deal.
That wasn't before Nixon.
The reason is the entire world was on what's called, they called it the gold standard.
It was really a kind of gold exchange standard or dollar standard for the world, but the dollar itself was tied to gold at $35 an ounce.
So the reason I say it wasn't quite a gold standard is because in the old days of the gold center, you had domestic convertibility.
You could take your dollar to the bank and get silver.
You could take precious metals, right?
Gold and silver were exchangeable domestically.
FDR put an end to that in 1933 with an executive order that banned holding gold, right?
I mean, like, you couldn't hold gold unless it was on a necklace or jewelry or something like that or a filling in your teeth.
But apart from that, you could not legally own gold.
Well, this is a devaluation measure as part of his effort to combat the Great Depression.
I mean, he was following Keynesian kind of prescriptions.
He wanted looser money.
He wanted to bail out the entire U.S. economy with loose credit and money printing and couldn't do that so long as the obligation was there to have to convert because everybody would immediately convert the dollar.
So he wanted the government to own all the gold in the country and he took it.
I mean, we think we're dealing with government tyranny today.
I can't even imagine what it must have been like to be alive in 1933 when you see that the government's actually collecting the gold in your vault.
It was one of the first things he did as president.
Well, the first thing he did was in prohibition.
Let's talk about triangulation, right?
Everybody cheered.
Great.
Let's have a beer.
Yeah.
Enjoy your beer while I take your gold.
Yeah.
So this went on.
So after World War II, we had this new system come along called, it was devalued from the New Deal period, but we had a new system called Britton Woods.
So under the Britain Woods system, the entire world economy, industrialized world economy, would be on the same system of dollars priced at $35 an ounce.
The gold would be exchangeable in dollars only on a nation-by-nation basis.
So it was a gold standard in the sense that Britain would ask for redemption for its dollars held in gold and the U.S. would send it.
Or there would be gold held in the U.S. and other nations would ask for gold in return.
So we had boatloads of gold being shipped around the world to maintain this system called Britain Woods that was established in 1944 as part of the sort of Britain Woods system, along with the World Bank and the International Monetary Fund and a nascent World Trade Organization.
This is the gold standard.
Now, the thing about this system is that it absolutely required that the U.S. maintain some fiscal and monetary discipline.
If things got out of hand, you could easily anticipate That the calls for gold out of the U.S. would become so exorbitant that it could essentially bankrupt the entire country, right?
So, so there was a discipline on the U.S., but it wasn't immediate like domestic convertibility.
It's just the prospect that something bad could happen in the future.
So, in the 1960s, let's say, you know, starting 20 years after the Britain Wood system, the U.S. found itself under LBJ.
And we started, you know, Vietnam War.
So, we had the war, warfare state, royalty, and blowing up all over the world.
So, dollars being sent all over the world.
Then you had the welfare state with growing deficits.
And then you had this rise of foreign aid to help other countries.
The U.S. became this kind of empire in the name of countering the influence of Russia, right?
But that's what blew up the entire financial stability of the monetary system.
So, in 1967, 68, 69, the calls on gold were just growing and growing and growing.
So, suddenly, Nixon inherits this situation.
And Fort Knox is being drained.
You know, they're banging on the doors, give us our gold, give us our gold, give us our gold.
So, he's dealing with this in 1971 alongside innumerable political problems for himself.
And so, he went to his advisors and said, What can we do?
And really, there were two choices: you could deflate, cut the budget, live within your means, right?
Which could probably provoke a recession and tank Nixon's popularity, or you could just make an announcement: no more gold exchange.
It's called the Nixon shock for a reason because the last president you would have expected to untie the dollar from this last tenuous link to gold would have been a Republican president.
Well, and so now what happens after that?
Well, again, the most horrifying thing you could ever imagine, which he imposed wage and price controls.
So, under penalty of law, nationwide wage and price controls to prevent inflation that would inevitably result from a shutting of the gold window because prices were going to bound up.
Everybody knew that.
People warned about it.
He said, Not a problem.
We'll just make an edict to stop this.
Well, this is a level of government imposition on people's lives that that generation had never experienced before.
We thought we were done with this kind of intrusive government with FDR in the first half of the 1930s.
And probably all told, we had not experienced anything like that until the COVID period, really, that level of sort of top-down management.
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It was the wrong thing to do, but it was the right thing to do.
He says both these things in his autobiography.
But actually, it was a catastrophically terrible day for America because it was the last source of fiscal discipline we had.
I mean, you think about what unfolded in the 1970s.
We had one wave of inflation.
The Fed raised rates, cracked down on that inflation, said, well, inflation's gone.
So they lowered rates.
We had a second wave of inflation.
The Fed said, oh, no, what are we going to do?
Raised rates and inflation died down a little bit.
And so they lowered rates a third time.
And boom, the most catastrophic inflation up to that point since the Revolutionary War hit the United States with double-digit inflation, gutting the capital stock, ruining the savings of every pensioner, throwing the entire American economy into massive upheaval.
Only a few years after that inflation, we saw households going from one income, able to sustain two cars and kids in school and a nice middle-class lifestyle and homeownership, to only being able to do that with two incomes.
So by 1985, the average mom with little kids was out working, paying taxes to the government.
This is a direct consequence, not of Gloria Steinem or whatever.
This is a consequence of the inflation, the third wave of inflation in the 1970s.
This never could have happened without the gold standard.
So this fiat money system, it reduced the purchasing power of the dollar dramatically.
It really took the brakes off Congress.
So now suddenly you have a Congress that doesn't even have to pay attention to how much debt it's creating with the spending plans.
It can just add zeros and zeros and zeros like we saw in the COVID to these preposterous bills and go, well, it's just, that's the way it goes.
Treasury gets a note, make debt.
And who buys the debt?
The Fed.
They're creating money.
Okay, so this is the system that Nixon's catastrophic decision in 1971.
This is what the system that he made possible with his Smithsonian agreement and ending the dollars linked to gold.
Big government just was unable to ever get back.
We are never able to cut it again.
We've really never cut the budget since those days.
It's fascinating to me, Dave, because there still remains a kind of nostalgia for the gold standard within the Republican Party.
In 1980, Reagan ran on a platform to restore the gold standard.
Well, haven't they, didn't Elon say something like, you know, even the elevator that they would have to go down there to get it hasn't been used in 40 years or something like that?
That makes it sound like the place has been raided.
And that's the reason why Nixon closed the gold window.
So I don't, you know, you say, well, did he have a choice?
Yeah, he had a choice.
He could have done the right thing, but he decided to do the wrong thing.
Okay.
So that's just a fact.
That's Richard Nixon.
So in some weird, strange way, Nixon, the Nixon presidency, was this sort of a shepherd or handmaiden to the whole of giant leviathan that we now live with.
That nobody seems to know what to what to do about.
And this was Nixon's doing.
It was not the legacy he wanted like, so it didn't want it.
It's so interesting because you're you're linking his economic you know what you're basically arguing were his economic failures to now what we all see as huge government overreach and almost everything.
But really, as you pointed out, the Covet stuff shows you, like the, the the hyper craziness of all that.
But the other part of it that's interesting was he was also president in a time when the media was changing and he seemed to not understand how to deal with that.
Yeah, he was a very, very grumpy guy uh uh, hated the press, hated the press more than you can possibly ever imagine.
The press hated him.
But the funny thing about Nixon is that he remained an enormously popular uh president, actually during his during uh, his first term it's, which began in 1968, and then his second, second term in 1972, if i'm getting this correct, and then he was.
Then uh, Watergate came along and uh uh, destroyed him.
I guess uh, there was a threatened impeachment.
He just, he just said look, I hate you guys guts.
And so he walked away from the whole thing.
You know which I can, you know I get it, but but he was very popular.
The reason for his popularity and I promise you, I think about my own father in this case, my father's very gentle, very rational man, but he loved the fact that Nixon was hated by all the people that he hated.
Do you see what I mean?
Like yeah, his popularity was sustained by his enemies right, so there was a there's a Trumpian quality to that.
There is very much that um, and this is what Trump gets More popular, the more the media attacks them.
I mean, it's like just advertisement for the MAGA movement.
You know, that's we've been watching this for 10 years.
This dynamic was foreshadowed in the world of Nixon.
And, you know, it's unclear.
I've thought about this a lot.
Why did the left and the media hate him so much?
And I really do think it traces back to the 1950s and his role in that his chambers trial, which for that generation was the most exciting thing to discover that there were communists in the State Department.
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And this is kind of right.
It's rather amazing.
So you'd think by our definition now they would have loved him because the government got bigger under him, budgets got bigger under him, control got bigger under him.
But actually, because of the relationship with the communists, it puts a little wrench in that.
I suppose he was a bit of a populist too, whatever that term means.
He always appealed to the middle class and to the people and over the heads of the overclass and had all sorts of nasty names for media elites and government bureaucrats and that sort of thing.
So that was very appealing to Republicans of the time.
And he was loved for his role in the his chambers trial and trusted for that reason.
And again, I don't think of Nixon as being a bad guy and since.
But the problem was he was undone by his wild insecurities.
He was desperate to be known as a great man and wanted to be a great leader and was seething with hatred of the media class and the elites and really wanted to rule them and show them that they were wrong and that he was a great man and a great president.
And this sort of internal psychological dynamic that comes through in his autobiography, I think ultimately led to his undoing.
Because if you look at things like why did he create the EPA?
Why did he impose wage and price controls?
Why did he take us off the gold standard?
Why did he become basically the godfather of late 20th century and 21st century big government?
He did it because he wanted to be loved.
More than anything else, he wanted to be loved.
And so confounding his enemies by doing their bidding was one of the ways he went about it.
So was that bring this all together, because I'm glad that we spend so much time on the monetary side because that's not really something that people know.
And I think you laid out quite nicely how it is so connected to really wildly out of control government that we all now see.
But to tie this to Watergate, which ultimately is the thing that people remember him about, was it really just his hubris then thinking that There's that quote.
I forget what exactly it was, but that's, you know, if I say it's true, it's true.
And, you know, in essence, I can do anything as president.
So I would say, you know, Nixon deserves more credit than he gets for having ended the draft and ending the Vietnam War.
So these are great actions.
And also, I don't object to the efforts he made on behalf of peace internationally, both with China and with Russia.
So, you know, in this sense, I think he probably had a savvy international sense of things.
But domestically, this was catastrophic.
I mean, he ruled in a way that traumatized his base and gave us big government like we had never seen before, including aggressive wage and price controls that didn't work, obviously, and gave us three waves of inflation by the end of the decade, ended up gutting the American capital stock and sending financial upheaval to the middle-class American family.