....today’s political scene is nothing like that of the early 1970s. In fact, surveying current politics, I find myself missing Richard Nixon.
... the Nixon era was a time in which leading figures in both parties were capable of speaking rationally about policy, and in which policy decisions weren’t as warped by corporate cash as they are now. Paul Krugman
Missing Richard Nixon- what an odd notion. Yet, I agree with Mr. Krugman. In one key respect, Nixon was wiser than Bob Rubin, Larry Summers and the supporters of IMF Gold sales. He knew that keeping Gold was a far better policy than selling it if one wished a strong US$.
In the past I've written disparagingly about Nixon's closing of the Gold window. In hindsight, and on reflection, I should have criticized his (and others' before and especially since) policies which created greater demand for Gold than US$s. If the US$ was indeed as good as Gold, the nasty currency speculators wouldn't have been trying to drain US vaults.
In the event, as the youtube clip below relates, currency speculators did try to drain US vaults and Nixon wisely, in this regard, pulled a Roberto Duran- No mas.
Had he tried to defend the $35 link to Gold "down to the last bar" as recommended by Treasury Under Secretary Barr, I doubt the US$ would have retained its dominant position in the reformed Bretton Woods system that emerged in the late 70s.
Interestingly, for those fearful of the agreed upon IMF sales, this isn't the first time for such a policy.
Shortly after Nixon's resignation, the Ford administration, in January 1975, began selling US Gold (after removing US ownership restrictions), a practice which continued through the Carter administration. In total some 530 tonnes were auctioned. Coincidentally, the IMF sold some 700 tonnes in a series of 45 auctions beginning in 1976 and ending in 1980. The price of Gold rose from $175 early in 1975 to well over $700 in 1980 while these auctions were ongoing. This at a time when the rest of the world's ability to pay was far less than it currently is. China can buy the whole lot from the IMF with a few month's worth of current account surplus.
I won't argue causality (as other factors, importantly the Fed's earlier easy money stance and the Volcker Fed's tight money policy had large effects), but I do find it interesting that the US$ kept sinking against Gold while US and IMF reserves were being sold, and stabilized when the auctions ended.
Consider. If your bank was selling its reserves would you consider that a sign of strength or a sign of weakness?