Chapter 4. Sunday, 15 August 1971: A Suspension Called Temporary, with Its Review Placed Abroad

The historical claim of this section is that the address of 15 August 1971 wrote down a condition of ending for one of its measures and none for the measure that mattered most. The import tax was to end when what the address called unfair treatment ended. The suspension of convertibility was called temporary and given an exception clause, but no date, no parity and no condition of return; in their place the address offered a reform of the international monetary system to be pursued with the International Monetary Fund and the country's trading partners. It put the object of any later review outside the United States. This bears on the debate between the domestic and the systemic readings of 1971, by showing where the announcement placed the cause, and on the debate over the escape clause, by showing what the public was given to expect.

4.1The order of the address

The excerpt begins with a war, not with money. Having spoken to the country often about bringing a war to a close, the President says, he judges that progress towards that end makes this Sunday evening the moment to look to the tasks of peace. The country, he continues, has its best chance in the century of two aims: lasting peace for a generation and a prosperity that does not depend on war. Reaching it means acting on three fronts at once: work for those who need it, a halt to rising prices, and a defence of the dollar against speculation in the currency markets. He promises to act boldly and on every front together. A new economic policy is due, aimed at joblessness, inflation and currency speculation.

The order bears on the debate over motive. The first front named is jobs, the second prices, the third the dollar; two of the three targets are domestic. The suspension is presented not as a response to a monetary emergency from nowhere but as the third element of a programme that begins with employment at home. That order is consistent with Gowa's account, in which the aim of lower unemployment and the electoral calendar were among the administration's priorities (Gowa 1983). It is also consistent with the systemic accounts, because the third front, as the address describes it, is a defence against attacks from abroad. A speech that lists jobs first tells a reader what its authors wanted voters to hear first, not which consideration decided the choice made in the days before, of which the address says nothing.

4.2The freeze: temporary by assertion

The second excerpt deals with the freeze on wages and prices, and the President points to two features of it. It will not last: to bind a vigorous economy in controls for good, he argues, would freeze injustices in place and hold back free enterprise. And although government penalties may enforce it, no large apparatus of price administration will be built; its success is to rest on the willing help of workers, employers and consumers, who together will defeat inflation without the compulsory controls he describes as destructive of economic and personal liberty.

Within the excerpt, the freeze is temporary because the President says so and because permanence would be unfair. The excerpt does not state the freeze's length; the study's reading note on the address describes the freeze as one of a fixed term in days (Nixon 1971). What the excerpt adds is a reason for impermanence, not a condition: it tells the listener why the freeze will stop and not what would have to be true for it to stop.

4.3The dollar: the passage that may be quoted

The third excerpt turns to the dollar, whose standing as an anchor of the world's money the President calls the third essential part of the programme, bound up with jobs and with stopping inflation. He then assigns blame. Currency crises, he says, have come about regularly in the recent past, and their winners have been neither wage earners nor investors nor those who make real goods, but speculators in money, who profit from crises and so help bring them about. In the past few weeks, he says, they have mounted a full-scale attack on the dollar. A currency, he says, draws its strength from the economy behind it, and no economy is stronger than America's; he has therefore told the Treasury Secretary to do what is needed to protect the dollar from them.

Then comes the sentence on which the evening turned, one of the two that the study's rules allow to be quoted:

"I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States."

The sentence does four things. It names who acts: the President directs, and the Secretary of the Treasury carries out. It names the act: the dollar's convertibility into gold and other reserve assets is suspended. It names the act's character with a single adverb, "temporarily". And it reserves an exception, "except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States". The exception clause is a reservation of discretion. It does not say on what condition the suspension ends; it says that during the suspension some conversion may still be allowed, in amounts and on conditions that the United States will determine by its own interest. The sentence has no date, no named parity and no event on whose occurrence convertibility would return.

Read against Bordo and Kydland's escape clause, the sentence has the first half of the form and lacks the second. It suspends convertibility in what it presents as an emergency, the assault of the speculators, and it calls the suspension temporary. What their reading requires besides is that the public expect a return to the old parity (Bordo and Kydland 1995). The address names no parity, old or new, and the passage that follows the sentence points the other way. Explaining what the step means for ordinary people, the President sets out to dispel worry about devaluation. Those who purchase an imported car or holiday overseas may find, as markets move, that their dollars go a little less far; the large majority who buy home-made goods at home will find their dollars unchanged from one day to the next. The step, he says, will steady the dollar.

This is a careful passage. It does not deny that the dollar may buy less abroad; it confines the loss to those who buy abroad and lays it to market conditions rather than to the act. A listener who held to the escape-clause reading would have found in it no promise of return to the old relation between the dollar and gold, and a hint that the dollar's relation to other currencies would for a time be left to markets. Kydland and Prescott's warning, that a plan best today may not remain best once others have acted on it (Kydland and Prescott 1977), is neither refuted nor confirmed by this. The announcer made no plan about return at all, and so left nothing whose later abandonment could be measured.

4.4The import tax: the one condition of ending

The address then adds another measure, meant to shield the dollar, improve the balance of payments and increase American jobs. Here is the second passage the rules allow:

"As a temporary measure, I am today imposing an additional tax of 10 percent on goods imported into the United States."

He presents the tax as preferable to fixing quotas on imports. What follows is the only place in the excerpts where the address states when an act will stop. The tax, he says, is a passing measure aimed at no particular country, meant to keep American goods from being handicapped by exchange rates he calls unfair; it will be dropped once that unfairness stops.

The condition is precise in form and open in content. It names an event, the end of the unfairness, and ties the end of the tax to it; it does not say who will judge that the unfairness has ended, by what measure, or by when. The unfairness lies in exchange rates, which the United States did not set alone, so the condition of ending the tax is a condition on other countries' conduct. The address then says whose conduct it means. Europe and Asia, the President recalls, came out of the Second World War in ruins, and American aid helped them recover, rightly. Recovered and now formidable rivals, whose prosperity he welcomes, they should now carry their proper part of the cost of defending freedom; currencies should be realigned, and the leading economies should compete on equal terms, with the United States no longer handicapped.

This passage carries the address's account of cause and its account of review in the same sentences. The cause it names is external: speculators, and competitors whose exchange rates are unfair. The review it implies is external too: the tax will be lifted when others change their rates. And the larger reform is placed abroad. To the country's partners the President offers reassurance that the United States will stay a reliable partner in trade, and promises to work with the International Monetary Fund and with other trading nations for a new international monetary order, so that the dollar is never again at the mercy of speculators. Here the address comes nearest to naming what would replace the suspended rule: not a return to the old convertibility, but a new system, to be built with others, whose shape it does not give.

4.5Whom the address names as bearing the cost

The address is direct about winners and losers. Speculators have profited from earlier crises, and currency dealers will not welcome the step. American workers come first, the President says. Buyers of imported goods and travellers abroad are warned that their dollars may stretch less far. Other nations are told it is now their turn to take up more of a burden the United States has carried. Workers, employers and consumers are asked to cooperate willingly with the freeze. The address does not name holders of dollars abroad, foreign central banks or the International Monetary Fund as parties who would bear the cost of suspended convertibility; it speaks to partners abroad in the language of reassurance.

The address thus names several groups as bearers in general terms, as listeners whose behaviour or patience the programme needs, and none as holding a claim that the act suspended.

4.6Who acted, and before whom

The sentence of suspension names a President directing a Secretary. The address is spoken to the nation on television, with no reference in the excerpts to Congress, to a statute or to any later confirmation, and the excerpts give no legal basis for the act. In this respect the address takes the shape Posner and Vermeule describe, in which the executive acts first in an emergency, the other branches defer, and political and informal checks such as public opinion do the main work (Posner and Vermeule 2010). The address is itself an appeal to public opinion: it ends by describing the whole set of measures as the broadest new economic programme the country had seen in decades. It explains the act to voters and reassures partners abroad. It reports to no one with power to undo it.

4.7The modern record

Skeptron's record of the day is brief. Its Scenario opens with the date and the act:

Its second question asks what domestic measures were announced with the suspension, and its answer repeats the point:

Its third question asks whether the meeting at Camp David and the national address are the same kind of record, and its answer separates them:

The fifth question counts the days between the start of the Camp David meeting and the announcement, and answers in the record's own terms:

And the record states plainly what kind of record it is:

Set against the address, the record keeps three things well. It keeps the date. It keeps the companionship of the suspension and the controls, which the address presents as parts of one programme. And it keeps the deliberations apart from the announcement, the distinction the debate over motive most needs: Gowa's account concerns the choice among options made in those days (Gowa 1983), and the record warns that the sequence of meeting and announcement does not show what the meeting decided or why. Neither the record nor the excerpts hold anything of the deliberations themselves; both are evidence about the announcement, not about the choice.

What the record loses is what this article asks about. It does not use the word temporary. Its title and Scenario call the act a stoppage, its fifth answer a suspension; it never reports that the President called the suspension temporary, or that he reserved an exception. It does not mention the import tax, so the one condition of ending that the address names is absent. And it names no one who bore a cost. Read for the study's own questions, the record leaves open whether it presents its act as temporary, which is what one would expect of a text that says suspension and never says temporary; it names no condition on which the act would end, says nothing of what became of it, and names no one who bore its cost; it does give two dated moments, the deliberations and the announcement.

The record's limits are not errors: a record that sets out to fix the date and scope of an announcement, and to keep it apart from the meeting before it, has done what it set out to do. But a reader who meets August 1971 through it does not learn that the announcer called the stop temporary while naming nothing that would end it, or that he named a condition for ending a different measure and placed that condition in other countries' hands.

4.8What the case adds

To the debate over motive, the case adds a description of where the announcement placed the cause in public: first at home, in jobs and prices, then abroad, in speculators and unfair exchange rates. The address fits Gowa's domestic reading in its order and the systemic readings in its account of the dollar, and cannot decide between them, because the choice it announces was made in deliberations it does not describe. To the debate over the escape clause, the case adds a precise finding about the text: the suspension was called temporary and given an exception clause, and no parity, date or condition of return was named; the one condition of ending in the excerpts belongs to the import tax and depends on other nations' conduct. A public that formed an expectation of return that evening had nothing in these words to rest it on.