Ending Bretton Woods: evidence from the Nixon tapes

Richard Nixon’s August 1971 announcement of a set of policies known collectively as the New Economic Policy (NEP), or the ‘Nixon shock’, effectively terminated the Bretton Woods system (BWS) of fixed exchange rates that had governed the international monetary system since 1944. While there are many accounts of Nixon’s decision to end the BWS, the secret Nixon White House tapes provide unique insights into the decision-making process and Nixon’s struggle with this decision. Using the tapes as evidence, we find that Nixon resisted ending the BWS for political reasons and did not fully understand the NEP’s strategy, particularly the fact that the domestic policies were designed to provide cover for the international policies. The tapes also clarify that the decision to adopt the NEP was made prior to the Camp David Summit of 13–15 August 1971 in response to general speculative pressure. While the US reacted to pressure on the dollar, Nixon and Treasury Secretary John Connally attempted to appear to be driving decisions for the domestic electorate. The temporary float of exchange rates as part of the NEP inevitably became permanent as a result of Nixon’s choice of advisors and his preferences for open capital flows and stimulative monetary policy.