POLS 375 Lecture Notes - Bretton Woods System, John Connally, Nixon Shock
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The Globalizing Economy
Collapse of the Bretton Woods System
Creation of the G7
Canadian Foreign Aid
Collapse of Bretton Woods
Countries wanted to micro-manage the economy as much as they could and
embrace free trade, which is incredibly contradictory.
We had an international system of fixed monetary value: currencies were pegged
to the U.S. dollar; the U.S. dollar was tied to gold… everyone knew how much the
This system was considered to be unproductive and didn't produce the results that
GM, Chrysler and Ford were guaranteed to make money… which made them
o As the rest of the global economy recovers, America is starting to feel the
strain of prepping up other economies via their currency.
o Inflation was wild during Nixon Administration.
The bad thing about inflation.
o Prices go up and can destroy savings, and an economy.
Nixon is concerned!
o Appoints John Connally as Treasury Secretary and the Shocks were largely
Suspends the ability to convert U.S. dollars into gold.
Decides "Gold Standard" is ghetto!
o Canadian exports to U.S. would eventually face an additional 10% tariff.
It does not help that Trudeau and Nixon dislike each other.
o Starting to recognize that U.S. is pissing off other countries in a very big way.
o Essentially minimized and removes 10% rule four months later.
o They never go back on the Gold Standard.
Nixon's economic approval rating.
o After the Nixon Shock, his approval rating goes up to 70%?!!?!
This eventually leads to Watergate, etc.
American were not planning on cutting anyone any slack.
In Canada, diversifying trade outside of the United States has been difficult.
o Free trade?!
The price of oil was tripled for U.S. exports!
o This raised third-world country debt.
o The 70s become a terrible economic decade.
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