The Crime of ’71: When Nixon Ended the Dollar’s Last Connection to Gold
Almost fifty years ago, on August 15, 1971, the US administration under President Richard Nixon (1913–94) abolished the gold redeemability of the US dollar. It was through this unilateral decision that the world’s major currencies were turned into irredeemable money: money that is no longer backed by physical gold. This surprise coup put an end to the system of Bretton Woods, which had been adopted in 1944.
From July 1 to 22 of that year, 730 delegates from forty-four nations met in the village of Bretton Woods in the US state of New Hampshire to determine the global monetary order for the period after the Second World War. Here it was agreed to give the US dollar the status of the world reserve currency. Thirty-five US dollars corresponded to one troy ounce of gold (i.e., 31.10347 … grams). All other currencies (the French franc, British pound, Swiss franc, etc.) were linked to the greenback at a fixed exchange rate, and they could be converted into greenbacks at any time. In this way they too were—at least indirectly—tied to physical gold.
However, one should not think that the Bretton Woods system was something like a reestablishment of the gold standard. Not even close. At best, it was something of a pseudo–gold standard. Although the US dollar was defined in terms of its physical gold weight, gold no longer circulated in day-to-day business in the world’s major economies. In the US, President Franklin D. Roosevelt (1882–1945) in 1933 had made gold ownership illegal for American citizens. Banks and consumers had to hand over their gold to the US Treasury. In return, they received US dollar banknotes and balances at the US central bank. Only in international payment transactions between central banks was the US dollar still redeemable in gold.
At the conference of Bretton Woods there was a consensus that there could be no reliable world currency system without gold playing a role. The proposals for the design of the world monetary system which compete
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