Best Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy By Jeffrey E. Garten

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Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy-Jeffrey E. Garten

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The former dean of the Yale School of Management and Undersecretary of Commerce in the Clinton administration chronicles the 1971 August meeting at Camp David, where President Nixon unilaterally ended the last vestiges of the gold standard—breaking the link between gold and the dollar—transforming the entire global monetary system.Over the course of three days—from August 13 to 15, 1971—at a secret meeting at Camp David, President Richard Nixon and his brain trust changed the course of history. Before that weekend, all national currencies were valued to the U.S. dollar, which was convertible to gold at a fixed rate. That system, established by the Bretton Woods Agreement at the end of World War II, was the foundation of the international monetary system that helped fuel the greatest expansion of middle-class prosperity the world has ever seen.   In making his decision, Nixon shocked world leaders, bankers, investors, traders and everyone involved in global finance. Jeffrey E. Garten argues that many of the roots of America’s dramatic retrenchment in world affairs began with that momentous event that was an admission that America could no longer afford to uphold the global monetary system. It opened the way for massive market instability and speculation that has plagued the world economy ever since, but at the same time it made possible the gigantic expansion of trade and investment across borders which created our modern era of once unimaginable progress.Based on extensive historical research and interviews with several participants at Camp David, and informed by Garten’s own insights from positions in four presidential administrations and on Wall Street, Three Days at Camp David chronicles this critical turning point, analyzes its impact on the American economy and world markets, and explores its ramifications now and for the future. 

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Former Yale School of Management Dean and long-time economic policy official in the Nixon, Ford, Carter, and Clinton administrations as well as being husband of Ina Garten, the Food Network’s Barefoot Contessa; Jeffrey Garten placed you in the room where global monetary policy was upended over an August weekend in 1971. Garten offers keen insights into the personalities in the room at Camp David. Of course there is Nixon whole loved to do bold and daring things, there is his Secretary of the Treasury John Connally who was the super hawk on trade and who was completely transactional, there was Arthur Burns the pipe smoking and vacillating Fed Chief, there was Peter Peterson forward thinking Nixon policy advisor, there was William Safire, the man who would write Nixon’s speech and there was Paul Volcker, the Under-Secretary of the Treasury for Monetary Policy who knew more about what they were about to do than anybody else. And although Henry Kissinger wasn’t present he had to deal with the after effects of of upsetting America’s allies.What they did that weekend was to take the United States off the gold exchange standard which was the foundation of international economic policy since the 1944 Bretton Woods agreement. What they also did was enact a 90-day price and wage freeze which would ultimately turn into an unmanageable regime of wage and price controls that would last for a few years. They also put a 15% tariff on European and Japanese imports upending the United States’ postwar free trade policy. It truly was the Nixon shock. U.S stocks initially rallied and Japanese stocks crashed.Garten explains in a nontechnical manner how the U.S. was running out of gold to back its currency and the economy was suffering from a bout of stagflation with rising inflation and unemployment. Although he doesn’t specifically mention it, Garten was writing about the Triffin Dilemma where the supplier of a global reserve currency has to continually supply increasing reserves to the world and in order to do that it has to run a balance of payments deficit. Thus, in the summer of 1971 U.S. gold reserves stood at $10 billion while foreign central banks had accumulated $40 billion in claims. Simply put we were broke.Garten starts his story in the late 1960’s when in fact he should have started it in November 1960 when after Kennedy’s election the price of gold soared from its fixed $35 an ounce to $40 an ounce. The market feared a U.S. devaluation which last occurred in 1933. The Kennedy Administration talked the market down but from then on, the balance of payments issue outlined by Triffin was top of mind among economic policy officials.Although it didn’t happen right away the Camp David meeting set into motion the transition away from fixed exchange rates to floating exchange rates, a regime we live under to this day. It also signaled that balance of payments considerations would no longer affect domestic monetary and fiscal policy opening the way to very expansive policies. After all Nixon wanted a booming economy to get re-elected. He got it and along with OPEC the way was open to the 1970’s inflation. Garten, I think rightly argues that the Nixon team didn’t have much of a choice with respect to leaving the gold exchange standard but was horribly wrong with respect to wage and price controls.One of the things that impressed me was Garten’s insights into John Connally. Connally was a brilliant synthesizer of complex information and he greatly respected Paul Volcker. He backed him to the hilt even when Nixon had his doubts. He also writes very favorably about Peter Peterson who ultimately hired him at Lehman Brothers and later at Blackstone. How influenced he was by his friendship with him, the reader does not know. Lastly as with Nixon’s sense of the dramatic, only one month before Nixon upended 30 years of U.S. policy by announcing his visit to China. All I can say the heads of my left-liberal friends were spinning as Nixon adopted many of their policies.Jeffrey Garten has given us great insights as to how a major policy decision was made and the importance of the personalities involved. I highly recommend the book.
The author deserves much credit for his (mostly) impartial recount of the Camp David event in which Nixon, brilliantly and boldly, took us off the gold standard for actual reasons of supply, rather than than the mainstream assumption to devalue due to gov't debt. The author conspicuously omits any mention of LBJ's MASSIVE spending on social programs and his enormous build-up of Vietnam. I enjoyed the in-depth exposition of each of the players involved -- their background and personalities. Just understand that this was written by someone in academia and formerly, but not presently, in the financial industry. The "Aftermath" segment was a bit overwritten. Also, I did not care for the line-by-line interpretation of Nixon's speech -- I'm always suspicious of that practice by "historians". However, this is an important story and Mr. Garten did an excellent job overall.

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