The 15-Minute Sunday Night That Ended the Gold Standard

On Sunday evening, August 15, 1971, Richard Nixon preempted Bonanza on NBC to announce what he called a 'New Economic Policy.' He spoke for 18 minutes. Most viewers went to bed thinking he had done something about inflation. What he had actually done was end the Bretton Woods international monetary system — a framework 44 nations had spent three weeks designing at a New Hampshire hotel in 1944.

Since 1944, foreign central banks had been able to trade US dollars for gold at a fixed price of $35 per ounce. The system worked as long as the US held enough gold to cover its obligations. By 1971, it didn't. The Vietnam War and Great Society spending had put far more dollars into the world than Fort Knox could back. De Gaulle's France had already started systematically exchanging dollars for gold. Britain had requested $3 billion in gold just days before Nixon's address.

Nixon's Treasury Secretary John Connally had a blunt assessment: 'The dollar is our currency but your problem.' Connally saw no reason to keep shipping American gold abroad to defend a peg that mostly benefited foreign exporters.

The suspension was announced as temporary. It became permanent. The Group of Ten met at the Smithsonian Institution in December 1971 and tried to patch together a new system of fixed exchange rates. By March 1973, that effort had also collapsed and currencies began floating against each other — a regime that persists today.

For the 20 years after 1973, the dollar lost two-thirds of its purchasing power. The tradeoff was flexibility: the Federal Reserve could now manage monetary policy without worrying about gold reserves.