Nixon Ends Gold Standard, Bretton Woods System Collapses

On August 15, 1971, President Richard Nixon announced his “New Economic Policy” in a televised address, unilaterally closing the gold window and ending the convertibility of U.S. dollars to gold at the fixed rate of $35 per ounce established under the Bretton Woods system. The “Nixon Shock” came after a secret Camp David meeting with Treasury Secretary John Connally, Federal Reserve Chair Arthur Burns, and key advisor Paul Volcker on August 13, where Nixon decided to abandon the international monetary system that had governed global finance since 1944. By 1971, U.S. gold reserves had fallen to approximately $10.2 billion, covering only 25% of foreign-held dollars estimated at $40 billion, creating unsustainable pressure as European nations demanded redemption of their dollars for gold.

The decision marked the beginning of the end for the Bretton Woods fixed exchange rate system. Nixon also imposed a 90-day wage and price freeze to curtail inflation and a 10% import surcharge to force other countries to revalue their currencies against the dollar. The December 1971 Smithsonian Agreement attempted to establish new fixed exchange rates centered on a devalued dollar, which Nixon characterized as “the most significant monetary agreement in the history of the world.” However, these rates proved unsustainable, and in March 1973, the G-10 countries effectively abandoned fixed exchange rates in favor of the current system of floating currencies.

The Nixon Shock fundamentally transformed global capitalism by severing the last link between currency and gold, enabling unprecedented expansion of debt-based monetary systems and dollar hegemony. The move gave the United States enormous flexibility to finance deficits through dollar creation, as global trade remained denominated in dollars despite their no longer being backed by gold. This shift laid the groundwork for the financialization of the American economy, the explosion of international debt markets, and the neoliberal economic order that followed. The decision demonstrated how executive power could unilaterally reshape global economic architecture to serve immediate political needs—Nixon faced reelection in 1972—while creating long-term structural advantages for American financial interests at the expense of international monetary stability.