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Nixon shock: the dollar leaves gold (1971)
Aug 15, 1971· Crisis or event
Fact, law or dataA rule, statute, definition or measured number.
On August 15, 1971, Nixon stopped converting dollars to gold for foreign governments, ending the dollar's gold anchor.
See it on the Money & Finance map →How it works
By 1971 foreign governments held far more dollars than US gold could cover at $35 an ounce, and some were cashing them in. After a secret weekend at Camp David with Treasury Secretary John Connally, Fed Chair Arthur Burns and Paul Volcker, Nixon announced on TV that he was 'temporarily' closing the gold window, freezing wages and prices for 90 days and adding a 10% import surcharge. Connally later told European officials the dollar was 'our currency, but your problem.'
Why it matters
It moved the world to fiat money and floating exchange rates, which still define the system today.
Facts, rules and data
Nixon's televised address, Treasury and Fed records, and speechwriter William Safire's account of the Camp David meeting.
Debates and risks
How much it fed the inflation of the 1970s is debated; oil shocks and loose Fed policy also played big roles.
Connections (4)
▸Nixon shock: the dollar leaves gold (1971) completed the global shift to Fiat money: currency backed by law and trust, not metalFact, law or data
The connection
Before 1971 the dollar was the last major currency with a gold link, and other currencies pegged to it. Once foreign governments could no longer swap dollars for gold, and pegs gave way to floating in 1973, no major currency had metal backing. Their value now rests on law, central banks and the economy behind them: fiat money.
When and why
Nixon's address of August 15, 1971; general floating from March 1973; the IMF's 1976 Jamaica agreement, effective 1978, formally ended gold's official role.
How we know
The amended IMF Articles abolished official gold prices, and no major central-bank law since has promised convertibility. The record is legal and uncontested.
Debates and risks
Gold advocates say fiat money enabled inflation and debt, as the dollar lost over 85% of its purchasing power since 1971; most economists credit it with letting central banks fight recessions.
▸Nixon shock: the dollar leaves gold (1971) ended Bretton Woods agreement (1944)Fact, law or data
The connection
By 1971 foreign-held dollars were several times the US gold stock at $35 an ounce, and countries such as France were converting dollars to gold. Closing the gold window removed the system's anchor. December 1971's Smithsonian Agreement tried new pegs, devaluing the dollar to $38 an ounce, but it collapsed, and major currencies floated by March 1973.
When and why
Camp David meeting August 13–15, 1971, with Nixon, Connally, Burns and Volcker; Smithsonian Agreement December 1971; floating March 1973.
How we know
Nixon's televised address, Treasury and Federal Reserve records, and the IMF's official histories of the period.
Debates and risks
Was collapse inevitable, as the Triffin dilemma suggests, or caused by 1960s US spending and loose money? Historians and economists still argue.
▸The petrodollar: oil priced in dollars since the 1974 US–Saudi deal propped up the dollar after Nixon shock: the dollar leaves gold (1971)Mainstream view
The connection
After the gold link broke in 1971 and oil prices quadrupled in 1973–74, the US needed new reasons for the world to hold dollars. Treasury Secretary William Simon's 1974 talks with Saudi Arabia arranged for the kingdom to buy Treasuries through special confidential channels, in return for US military and economic support. Oil money flowing back steadied the floating dollar.
When and why
Simon's July 1974 trip to Saudi Arabia, after a June 1974 joint economic commission; Saudi purchases were made outside regular Treasury auctions.
How solid is the link?
Declassified Treasury cables obtained by Bloomberg in 2016 describe the deal; until then Saudi holdings were reported only within a broader oil-exporter total.
Debates and risks
Viral 2024 claims that a 50-year 'petrodollar treaty' had expired were false; no treaty existed. How decisive the deal was versus market forces is debated.
▸Nixon shock: the dollar leaves gold (1971) removed a brake on The Great Inflation and 1970s stagflationExperts disagree
The connection
Under Bretton Woods, inflating faster than other countries drained US gold, a check on easy money. Closing the gold window in 1971, and floating exchange rates from 1973, removed that check. The dollar weakened, import prices rose, and the Fed faced no outside limit as inflation climbed.
When and why
Washington, August 15, 1971; general floating from March 1973; inflation passed 12% in 1974.
How solid is the link?
The timing is documented, but the causal link is debated; oil shocks and Arthur Burns's easy Fed policy also drove inflation.
Debates and risks
Some economists see the end of gold as central; most give more weight to Fed choices and oil, noting inflation was already rising before 1971.