On the journey towards President Nixon’s fateful decision on August 15th, 1971 to suspend dollar-gold convertibility—a decision that would forever change the global economy—we meet William McChesney Martin Jr, the longest-serving Fed chairman in history and arguably the most consequential economic US policy maker since Alexander Hamilton.

After negotiating Fed independence as an Assistant Treasury Secretary with the 1951 Fed-Treasury Accord, President Truman appointed Martin as chairman of the Fed. For two decades, Martin fought to establish Fed independence while pursuing the long-term interests of the US—fighting inflation, defending the dollar, and facing off against five presidents.

While he navigated the demands of a booming economy at home, Martin coordinated with US allies to stabilize exchange rates and grow world trade—all while balancing the needs of Cold War military spending, allied foreign aid, and private capital outflows.

We trace the mounting pressure from the late 1950s gold spike through Vietnam-era deficits as Martin tries to hold the line with rate hikes, diplomacy, and sheer credibility among global central bankers. It’s the story of a principled broker navigating guns-and-butter politics while the world loses faith in dollar-gold convertibility—and according to his own assessment, he was almost successful too… almost.

Chapters

(00:47) Introduction

(03:33) William McChesney Martin Jr.

(09:14) The 1951 Fed-Treasury Accord

(12:42) Truman Appoints Martin as Fed Chairman

(13:34) Eisenhower Presidency Reinforces Fed Independence

(17:00) Comparing Growth & Productivity during This Period to Today

(18:41) Gold Drain and Military Spending

(22:51) Price of Gold Breaks $35/oz

(26:52) The JFK Years: More Military Spending & Tensions with France

(34:12) Bretton Woods and Inflation

(36:36) Central Bank Swap Lines

(41:05) Confrontation at LBJ’s Ranch

(44:53) The Circularity of Dollar Strength and Military Spending

(56:40) Bill Martin’s Legacy and State of the Fed as Nixon Takes Office

References

Chairman of the Fed: William McChesney Martin Jr. and the Creation of the Modern American Financial System by Robert P. Bremner

Gold, Dollars, and Power: The Politics of International Monetary Relations, 1958-1971 by Francis J. Gavin

https://wtfhappenedin1971.com/

Gold, power, war, and spies—this series has it all. On August 15th 1971, President Nixon announced that he was suspending the dollar’s convertibility into gold. This announcement upended the Bretton Woods monetary system and set the world on a course towards floating exchange rates with the US dollar as a fiat reserve currency for world trade—a system that is under significant pressure today.

In the first episode of the series, we tell the story of how an ambitious, little-known American technocrat—Harry Dexter White—went toe-to-toe with the world-famous John Maynard Keynes to rewrite the rules of global finance.

Bretton Woods wasn’t just a conference. It put the US dollar at the center of a new monetary order, backed by roughly two-thirds of the world’s gold and America’s unrivaled economic power after World War II. Delegates representing 44 nations agreed to fixed exchange rates, created the IMF and World Bank, and made the dollar “as good as gold.”

We trace how global leaders were traumatized by the economic chaos following World War I—trade wars, currency collapses, and the Great Depression. Against this backdrop, we explore how White moves from the periphery of academic economics to play a central role in FDR’s Treasury. From there he outmaneuvers John Maynard Keynes and secures American primacy, despite also moonlighting as a Soviet spy.

This episode covers the genesis of a system every president from Truman to Nixon would struggle to defend—and the traces of which still shape the world economy today.

Chapters:

(00:18) Introduction

(03:47) Background on Harry Dexter White

(6:29) Economic Backdrop Leading to Bretton Woods

(12:58) Barter Trade vs. Free Trade

(15:22) Background on John Maynard Keynes

(18:06) Keynes and White Meet in London

(20:02) Harry Dexter White, from Periphery to Center

(24:13) White Gets to Work on New Monetary System

(32:24) US Leverage over the UK

(37:32) The Build Up to Bretton Woods

(41:54) Harry Dexter White’s Triumph at Bretton Woods

(46:59) The Aftermath for White and Keynes

(48:01) Reflections on White’s Soviet Espionage

(55:16) Questions for Today’s Global Trade & Monetary System

References:

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

https://wtfhappenedin1971.com/