Abstract
The second Nixon shock was delivered on Sunday, 15 August 1971, which in a piece of unfortunate timing was the 26th anniversary of Japan’s surrender. Speaking in a live television broadcast, Nixon announced measures to protect the dollar and to shore up the US economy. These included an end to the convertibility of the dollar to gold, a 10% import surcharge and domestic wage and price controls.1 This so-called New Economic Policy effectively ended the period of American leadership of the world economic and financial system which had been in place since the end of the Second World War. By the late 1960s and early 1970s, the economies of western Europe and Japan had recovered from the devastation of war and were now threatening the US economy with cheaper imports. As a result, America’s trade balance, long in surplus, slipped into deeper and deeper deficit. In removing the peg to gold, Nixon effectively devalued the dollar against other currencies and therefore made American goods cheaper to sell and foreign goods more expensive to import. The surcharge, which further added to these prices, was a temporary measure. It would, Nixon outlined, be removed once a new currency arrangement between the major industrialised nations was agreed upon.
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Notes
Richard Nixon, ‘Address to the Nation Outlining a New Economic Policy: “The Challenge of Peace”,’ 15 Aug. 1971, Gerhard Peters and John T. Woolley (eds), The American Presidency Project, accessed 15 Sep. 2011, http://www.presidency.ucsb.edu/ws/?pid=3115.
Entry of 16 Aug. 1971, Kusuda Minoru, Satō Eisaku sōri shuseki hishokan no 2000 nichi [Diary of Kusuda Minoru: 2000 Days as Prime Minister Satō Eisaku’s Private Secretary]. Edited by Makoto Iokibe and Wada Jun (Tokyo: Chūō Kōron Shinsha, 2001), 629.
Michael Schaller, Altered States: The United States and Japan since the Occupation (Oxford: Oxford University Press, 1997), 244.
Memorandum of Conversation, Johnson, Satō, ‘U.S.-Japanese Relations and Security Problems,’ 15 Nov. 1967, Foreign Relations of the United States, 19641968, vol. 29, part 2, Japan (Washington, DC: 2006), doc. no. 106, 237. See also Chapter 2.
I. M. Destler, Haruhiro Fukui and Hideo Sato. The Textile Wrangle: Conflict in Japanese-American Relations, 1969–1971 (Ithaca, NY: Cornell University Press, 1978), 158–178.
Memorandum of Conversation, Nixon, Satō, 24 Oct. 1970, in National Security Archive (ed.), Japan and the United States: Diplomatic, Security and Economic Relations, 1960–1976 (Washington, DC: 2000; henceforth NSA, Japan and the United States), doc. no. 1341.
Thomas W. Zeiler, ‘Nixon Shocks Japan, Inc.,’ in Nixon in the World: American Foreign Relations, 1969–1977, ed. Fredrik Logevall and Andrew Preston (Oxford: Oxford University Press, 2008), 296.
Liang Pan, ‘Whither Japan’s Military Potential? The Nixon Administration’s Stance on Japanese Defense Power.’ Diplomatic History 31, no. 1 (2007): 123–124.
Kissinger to Nixon, ‘My 16 August Meeting with the Chinese Ambassador in Paris,’ 16 Aug. 1971, Foreign Relations of the United States, 1969–1976, vol. 17, China, 1969–1972 (Washington, DC: Government Printing Office, 2006), doc. no. 155, 478; see also Memorandum of Conversation, Kissinger, Huang Chen, 16 Aug. 1971, Foreign Relations of the United States, 1969–1976, vol. E-13, Documents on China, 1969–1972, doc. no. 17, accessed 28 Sep. 2011, http://history.state.gov/historicaldocuments/frus1969-76ve13/d17.
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© 2015 Fintan Hoey
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Hoey, F. (2015). Economic Woes, 1971–1972. In: Satō, America and the Cold War. Security, Conflict and Cooperation in the Contemporary World. Palgrave Macmillan, London. https://doi.org/10.1057/9781137457639_9
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DOI: https://doi.org/10.1057/9781137457639_9
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