Anthony J. Pennings, PhD

WRITINGS ON DIGITAL ECONOMICS, ENERGY STRATEGIES, AND GLOBAL COMMUNICATIONS

How IT Came to Rule the World, Digital Monetarism

Posted on | April 22, 2010 | No Comments

This is the 14th post in the mini-series How IT Came to Rule the World

    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 interests of monetary stability and in the best interests of the United States.
    – President Richard Nixon on national TV, August 15, 1971

This morning as I was coming home from my daughter’s Kindergarten class, I had to traverse the security for President Obama’s talk at Cooper Union on financial reform. With all the talk on derivatives and financial technologies, I thought I would move on the Regime Two of this series. Almost as soon as the combination of computer technologies, satellites, and data communications became available they started to be integrated into the financial field.

The regime of digital monetarism emerged in reaction to containment capitalism and involved releasing the powers of finance capital and creating transnational flows of electronic information, news Nixon takes the US off the gold - dollar standard established at Bretton Woodsand money. The containment regime was state-centric and involved elaborate regulatory structures to suppress domestic and international flows of money and also channel excessive economic surpluses into government activities.

While the idea of a regime is meant to be fluid, digital monetarism can be given a start date: On August 15, 1971, President Nixon shocked with world with his surprise television announcement that he was “closing the gold window” and no longer honoring the redemption of dollars for gold. Too many dollars had been created by the international financial system and they threatened the gold stockpiles at Fort Knox. Meanwhile, Nixon was preoccupied with economic battles with Japan and West Germany while also wanting to “print” more money to pay for the Vietnam War. After convening a secret meeting at Camp David among his top advisors, Nixon decided to renege on the country’s international agreements created at the Bretton Woods conference on dollar convertibility and sought to free up the US so it could create a more fluid regime of currency transactions and capital flows.

Nixon’s decision came at a unique time in computer and communications history. Silicon “chips” had recently become commercially available with integrated circuits being used in minicomputers and the revolutionary “microprocessor” on the verge of widespread availability in “microcomputers” such as the Altair and the Apple II. The FCC had been holding hearings on computer communications since 1966 in order to facilitate public-switched data networks and timesharing systems were in regular use. ARPANET was primitive, but online, and about to become the Internet with the development of the TCP protocols. An international satellite communications system was recently available and Nixon himself had made the longest phone call in history to the first astronauts on the moon in 1969. Furthermore, the Nixon administration created the Office of Telecommunications Policy (OTP) in 1970 that was quite active in a number of telecommunications deregulatory measures that opened up AT&T’s network and allowed companies such as MCI to compete. The time was ripe for an explosion of new technologies in the financial field.

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Category: democratic political economies, digital monetarism, financial news, financial technology, how IT came to rule the world
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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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