50 Years After the Nixon Shock, Global Unity Is Needed To Prevent Another Crisis

For the past 50 years, the global economy has been toyed with by wave after wave of ever-inflating capital.

　

In August 1971, U.S. President Richard Nixon announced that America would suspend the Bretton Woods system, a set of rules for exchanging dollars and gold that helped sustain international currencies post-World War II. Without support, the dollar went into freefall, an event now known as the Nixon Shock. It was around this time when America’s dominance in the Vietnam War began to falter. The fixed market value of 360 yen to the dollar was abandoned as free trade now determined exchange rates. With the shackles broken, money flowed freely around the world, leading to a globalization of the economy, pushing it into an age of excess liquidity.

Speculation on foreign currency and stocks grew stronger, leading to the 2008 financial crisis and the rise and fall of the bubble economy, which would cripple Japan for years. As a result of the Plaza Accord of 1985, the dollar depreciated as the yen rapidly grew in value, forcing the Bank of Japan to purchase large amounts of bonds in an attempt to prevent a recession.

The conflagration that caused is still smoking, as under COVID-19, stock prices have been swollen to a worrying degree by large amounts of capital. New and ever-popular cryptocurrencies, as the target of “money games,” also contribute to the violent fluctuation of market prices.

Repeating the mistakes of the past will never allow the global economy to heal. We must work together to make our currencies stable, and it must start with countries like Japan, America and those in Europe that are overflowing with money used in policies like rampant public spending and monetary easing. These practices must be brought to a halt.

As America’s economy worsens, so too will people’s trust in the dollar, the most widely used currency in the world. America must remember that its actions have consequences in other countries all over the globe too.

Then there’s the power struggle between the U.S. and China, which is expanding the use of its digital renminbi that can even be used abroad, with the hopes of spreading it to other countries participating in the Belt and Road Initiative. America is very wary of the dollar’s position as the key currency being threatened, but, following the restrictions it placed upon Chinese semiconductors, the separation of global currencies is feared to widen.

This antagonism will only make things worse as the world economy wrestles with COVID-19. Superpowers need to work toward global stability, rather than actively undermine it.