Nixon, the Dollar, and the Emerging New Money Revolution: The emergence of weightless globalization.

• Author: James, Harold

Richard Nixon in 1971 embraced a mendacious narrative of economic nationalism that has haunted, and damaged, the United States ever since: it shaped a new approach to money, without dethroning the U.S. dollar. Today, protectionist currency politics are also rampant; but rapid technological developments in money and payments technology are generating a radically transformative rethinking of money.

Nixon's announcement on August 15, 1971, was, as he intended, game-changing--but not at all in the way that Nixon imagined or promised. He started his televised address with the observation that: "Prosperity without war requires action on three fronts: We must create more and better jobs; we must stop the rise in the cost of living; we must protect the dollar from the attacks of international money speculators."

The American president did indeed, eventually, end the long war in Vietnam, perhaps the prime driver of the increasing American malaise. But instead of creating more jobs, the end of the par value system (Bretton Woods) produced a decade in which unemployment soared and manufacturing jobs were lost; inflation increased dramatically rather than falling; and international capital markets (also known as international money speculators) had a bonanza. Far from being repelled as a result of government action, they took over the American economy.

It wasn't just a bad prophecy or prediction. Nixon's speech was full of a dishonesty that was starkly apparent at the time. The president assured: "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."

Nixon was uncannily echoing another persistently mendacious political leader, Britain's Harold Wilson, who had told the British public after the 1967 devaluation of sterling that: "From now on, the pound abroad is worth 14 percent or so less in terms of other currencies. That doesn't mean, of course, that the Pound here in Britain, in your pocket or purse or in your bank, has been devalued." That pronouncement too had been subjected to immediate ridicule, as the effect of devaluation on import prices was even more apparent in Britain, as a smaller and more open economy.

There were also parallels in the repercussions of the 1967 and the 1971 currency moves. The devaluation of the world's second reserve currency, the British pound, set the stage for increasing...