The cheapest lessons are provided by history, sadly they are often ignored as irrelevant or untimely. In 1971, Nixon took the US off the gold standard and also put an immediate 10% tax on import goods including the use of price and wage freezes. He blamed speculators and wrapped the message up in “worker support” speak and anti-elitist tones.
Many Americans would now believe these types of actions to be the sole activity of banana republics. Things can change in an instant. This post isn’t about a party, policy or president, merely a pointer to a past that isn’t really that far past. If you are young read more history, if you are old, don’t forget.
Here is a transcript of the video I had produced for $1 on Mechanical turk:
The third indispensable element in building the new prosperity is closely related to creating new jobs and halting inflation. We must protect the position of the American dollar as a pillar of monetary stability around the world. In the past seven years there has been an average of one international monetary crisis every year.
Now who gains from these crises? Not the working man, not the investor, not the real producers of wealth. The gainers are the international money speculators. Because they thrive on crises, they help to create them. In recent weeks the speculators have been waging an all out war on the American dollar.
The strength of a nation’s currency is based on the strength of that nation’s economy, and the American economy is by far the strongest in the world. Accordingly, I have directed the Secretary of the Treasury to take the action necessary to defend the dollar against the speculators. I directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the United States.
Now what does this action, which is very technical, what does it mean for you? Let me lay to rest the bugaboo of what is called devaluation. If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. The effect of this action in other words will be to stabilize the dollar. Now this action will not win us any friends among the international money traders, but our primary concern is with the American workers and with fair competition around the world.
To our friends abroad including the many responsible members of the international banking community who are dedicated to stability in the flow of trade, I give this assurance: The United States has always been, and will continue to be, a forward-looking and trustworthy trading partner. In full cooperation with the International Monetary Fund and those who trade with us we will press for the necessary reforms to set up an urgently needed new international monetary system.
Stability and equal treatment is in everybody’s best interest. I am determined that the American dollar must never again be a hostage in the hands of international speculators. I am taking one further step to protect the dollar, to improve our balance of payments, and to increase jobs for Americans.
As a temporary measure I am today imposing an additional tax of ten percent on goods imported into the United States. This is a better solution for international trade than direct controls on the amount of imports. This import tax is a temporary action. It isn’t directed against any other country. It’s an action to make certain that American products will not be at a disadvantage because of unfair exchange rates.
When the unfair treatment is ended, the import tax will end as well. As a result of these actions the product of American labor will be more competitive and the unfair edge that some of our foreign competition has will be removed. This is a major reason why our trade balance has eroded over the past 15 years.