The Nixon shockwas a series of economic measures undertaken by United States President Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct international convertibility of the United States dollar to gold. At the time, the U.S. also had an unemployment rate of 6.1% (August 1971) and an inflation rate of 5.84% (1971). To combat these problems, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing wages and prices for 90 days to combat potential inflationary effects; and impose an import surcharge of 10 percent, to prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates. The first order was for the gold window to be closed. Foreign governments could no longer exchange their dollars for gold; in effect, the international monetary system turned into a fiat one. Shortly after the plan was implemented, the growth of employment and production in the United States increased. Inflation was practically halted during the 90-day wage-price freeze but would soon reappear as the monetary momentum in support of inflation had already begun. Solution The Nixon shockwas a series of economic measures undertaken by United States President Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct international convertibility of the United States dollar to gold. At the time, the U.S. also had an unemployment rate of 6.1% (August 1971) and an inflation rate of 5.84% (1971). To combat these problems, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing wages and prices for 90 days to combat potential inflationary effects; and impose an import surcharge of 10 percent, to prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates. The first order was for the gold window to be closed. Foreign governments could no longer exchange their dollars for gold; in effect, the international monetary system turned into a fiat one. Shortly after the plan was implemented, the growth of employment and production in the United States increased. Inflation was practically halted during the 90-day wage-price freeze but would soon reappear as the monetary momentum in support of inflation had already begun..

1. The Nixon shockwas a series of economic measures undertaken by United States President
Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct
international convertibility of the United States dollar to gold.
At the time, the U.S. also had an unemployment rate of 6.1% (August 1971) and an inflation rate
of 5.84% (1971).
To combat these problems, relying heavily on the advice of the self-confident Connally, decided
to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing
wages and prices for 90 days to combat potential inflationary effects; and impose an import
surcharge of 10 percent, to prevent a run on the dollar, stabilize the US economy, and decrease
US unemployment and inflation rates.
The first order was for the gold window to be closed. Foreign governments could no longer
exchange their dollars for gold; in effect, the international monetary system turned into a fiat
one.
Shortly after the plan was implemented, the growth of employment and production in the United
States increased. Inflation was practically halted during the 90-day wage-price freeze but would
soon reappear as the monetary momentum in support of inflation had already begun.
Solution
The Nixon shockwas a series of economic measures undertaken by United States President
Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct
international convertibility of the United States dollar to gold.
At the time, the U.S. also had an unemployment rate of 6.1% (August 1971) and an inflation rate
of 5.84% (1971).
To combat these problems, relying heavily on the advice of the self-confident Connally, decided
to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing
wages and prices for 90 days to combat potential inflationary effects; and impose an import
surcharge of 10 percent, to prevent a run on the dollar, stabilize the US economy, and decrease
US unemployment and inflation rates.
The first order was for the gold window to be closed. Foreign governments could no longer
exchange their dollars for gold; in effect, the international monetary system turned into a fiat
one.
Shortly after the plan was implemented, the growth of employment and production in the United
States increased. Inflation was practically halted during the 90-day wage-price freeze but would
soon reappear as the monetary momentum in support of inflation had already begun.