Remembering Nixon

The US media is now intensely debating who will make it to the White House in January 2017. What pops up in the debate is another important question: Who has been the best US president? The obvious answer is Franklin Roosevelt, who led the country out of the Great Depression and played an instrumental role in establishing institutions such as the IMF and the World Bank.

Some would rate Ronald Reagan as the best in recent times. But few seem to have realised the contribution of Richard Nixon, who unfortunately is being remembered for all the wrong reasons, thanks to the Watergate scandal.

That said, Nixon was responsible for two major decisions that saved the US economy from near collapse in the early 1970s.

In 1965, President Lyndon Johnson sent combat troops to Vietnam. And very soon it was evident that it was a major disaster as casualties rose to levels the country had not seen since the Civil War. It was Nixon who ended the war in Vietnam in January 1973.

In the wake of World War II, the international monetary system was founded on the premise that the US would exchange gold for dollar at the fixed exchange rate of $35 per ounce of gold. Till 1966, no country had ever exercised the option of exchanging dollar for gold. After the US engaged itself in the war in Vietnam, the expenditure had a major impact on the finances of the country in the late 1960s.

Soon, European banks lost confidence in US dollar. Countries such as France started demanding gold from the US in exchange for their dollar holdings.

It started looking as if the gold stocks held in Fort Knox would be depleted if the US were to be giving away its gold in exchange for the dollar.

President Nixon unilaterally announced on August 15, 1971, that the US would no longer exchange gold for the dollar.

He took neither his European allies into confidence nor did he keep the IMF in the picture while taking a decision that was responsible for the collapse of the international monetary system founded on the Bretton Woods principle of fixed exchange regime.

Nixon thus was responsible for saving the US economy from possible ruin. He appointed Henry Kissinger as the secretary of state; he in turn persuaded Richard Nixon to start a dialogue with China. This came to be known as Ping Pong diplomacy.

Unfortunately, theWatergate scandalforced him to quit the presidency, even though his direct involvement was never proved. . And today he is not remembered for the decisions that saved the US economy but for the phone-bugging scandal. In his final years, Nixon was literally hounded; nobody was even willing to rent out an apartment to him.

The writer is a former staff member of the IMF in Washington DC

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