Nixon Shock

DEFINITION of 'Nixon Shock'

A term used to describe the actions taken by former U.S. President Richard Nixon in 1971 that eventually led to the collapse of the Bretton Woods system. The policies imposed and the actions taken by President Nixon included imposing a 90-day wage and price freeze in America, a 10% import surcharge and, most notably, closing the gold window, effectively making the U.S. dollar inconvertible to gold.

BREAKING DOWN 'Nixon Shock'

The ramifications of Nixon Shock rocked the global economic landscape. By closing the gold window, the United States made it impossible for other nations to peg their currency to the gold standard, which was the underlying principle behind the Bretton Woods system. As a direct result of the economic policies imposed by the United States at the time, the gold standard was all but abandoned and the world's major currencies began to float.

RELATED TERMS
  1. Short Gold ETF

    An exchange traded fund that seeks to profit from negative changes ...
  2. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central ...
  3. Gold Bull

    A slang term for a market or investor who is bullish on gold. ...
  4. Surcharge

    A fee or other charge that is added to the cost of a good or ...
  5. Digital Gold Currency - DGC

    An electronic, private currency backed by gold bullion. Companies ...
  6. Trade Sanction

    A trade penalty imposed by one nation onto one or more other ...
Related Articles
  1. Forex Education

    On This Day In Finance: July 20 - Congress Approves The Bretton Woods Agreement

    United States Congress officially approves the Bretton Woods Agreement, thus including the U.S. in the Bretton Woods System.
  2. Economics

    The Great Inflation Of The 1970s

    Political moves meant prevent unemployment served to do the opposite, creating one of the worst fiscal disasters of the century.
  3. Forex Education

    Bretton Woods: How It Changed the World

    While the Bretton Woods system is no longer in place, it fundamentally changed the international monetary order.
  4. Forex Education

    Forex Tutorial: Forex History and Market Participants

    Given the global nature of the forex exchange market, it is important to first examine and learn some of the important historical events relating to currencies and currency exchange before entering ...
  5. Investing Basics

    Everything You Ever Wanted To Know About The Gold Standard

    Many feel that with the instability that occurred in the first decade of the 21st century, some form of the gold standard should be brought back.
  6. Stock Analysis

    Building a Better Gold Standard

    While there has been a growing amount of talk coming from Republican circles about returning to the gold standard, there's a better way to do it without all the trouble of actually doing it, ...
  7. Forex Education

    Gold: The Other Currency

    Throughout history, gold has held its value against paper currencies. Learn how it can help offset market risks.
  8. Options & Futures

    Why Gold Is No Longer the Currency King

    Although a gold standard seems like a good idea, looking at its role in U.S. history reveals that it may not be the beacon of stability that it claims.
  9. Forex Education

    America's Loss Is The Currency Market's Gain

    The Smithsonian Agreement hurt the U.S. in the short-term, but was necessary in furthering real market-driven exchange rates.
  10. Options & Futures

    Does It Still Pay To Invest In Gold?

    This asset's appeal dates back thousands of years. Find out whether it can live up to the hype.
RELATED FAQS
  1. What countries have the largest gold reserves?

    Find out which countries have the largest gold reserve stockpiles, and learn why governments still feel that it's necessary ... Read Answer >>
  2. Has gold been a good investment over the long term?

    Examine the performance of gold as an investment, dating back to 1933, when President Roosevelt required all gold bullion, ... Read Answer >>
  3. What are the primary factors that led to the difficult period of stagflation during ...

    Learn about the primary factors that led to stagflation in the 1970s, a painful period characterized by high inflation combined ... Read Answer >>
  4. How can I track gold prices?

    Learn how to track gold prices. Gold is a commodity traded as a physical asset and a futures contract. The one you track ... Read Answer >>
  5. How can I invest in gold?

    Investing directly in commodities, such as gold or oil, tends to be more difficult for investors than investing in stocks ... Read Answer >>
  6. What is the purpose of the International Monetary Fund?

    Read about the stated goals of the International Monetary Fund, which acts as an economic adviser and lender of last resort ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center