Fifty-Five Years Ago Tonight, Nixon Said "Temporarily" — and the World Still Runs on That Temporary Measure — Woody Magazine, Aug. 15, 2026
Fifty-Five Years Ago Tonight, Nixon Said “Temporarily” — and the World Still Runs on That Temporary Measure
The gold standard was never abolished. It failed to come back.
Richard Nixon took the dollar off gold. That is how most of us learned it, and it is how the textbooks date things: August 15, 1971, the day the gold standard died. Fair enough. After that night, the dollar really was done with gold.
But the word “abolish” appears nowhere in the speech Nixon gave that evening. The word he chose was “temporarily.” He had directed his Treasury secretary, he told the country, to suspend temporarily the convertibility of the dollar into gold. That was the whole of it. He said the pause was a pause. The window never reopened.
If a government decides to end a system and ends it, the story is simple. The record shows something else. For nearly two years after that night, Washington and its partners tried twice to bring the promise back, and failed twice. August 15, 1971 was not the day the gold standard ended. It was the day the ending began to be postponed.
The Memory in the Room
The story begins with a promise. In July 1944, delegates from 44 nations gathered at a resort hotel in Bretton Woods, New Hampshire, to write the money rules for the postwar world. The rules fit in two lines. The United States would redeem dollars from foreign governments in gold, at $35 an ounce. Everyone else would peg their currencies to the dollar. Only one currency touched gold, and every other currency in the world hung from it.
It is a strange design. If gold was so trustworthy, why not tie everyone to it? If gold was the problem, why not drop it altogether? The answer lay in what the people in that room remembered. In the 1930s, the world had already run a system in which many countries were chained to gold at once. The countries bound tightest suffered the Depression deepest and longest, and the ones that cut loose first recovered first. Economic historians still point to those chains as the main channel that carried the Depression around the world. Yet dropping gold entirely called up the other memory of the same decade: the competitive devaluations of the currency wars, each country cheapening its money to beggar its neighbors. Too much discipline had brought depression. None at all had brought a brawl. So the designers split the difference — gold's discipline would bind one country only, and everyone else would get room to breathe.
The Only Store in Town
To see the arithmetic under that compromise, picture America as the only store in town that prints its own scrip. There is gold in the safe in the back, and every note of scrip carries the store's promise: bring this in, and we will hand you gold. The townspeople trade in scrip instead of gold because it is lighter, easier, and as good as gold — redeemable any time.
The store opened with a full safe. When the war ended, two-thirds of the world's monetary gold sat in American vaults. The trouble grows with the business. As the town's trade expands, more scrip has to circulate, and scrip can only circulate by leaving the store. But every note outside the store is a claim on the safe. The trade grows year after year; the gold in the safe does not. The better the store does, the more paper exists that can be walked back in and presented for gold.
Federal Reserve statistics trace the path exactly. In 1959, the dollars piled up outside America drew level with the gold inside it. In 1964, the dollars held by foreign governments and central banks alone passed the gold.
From that point, the $35 promise was one that arithmetic could no longer keep. It could only survive the way any promise like it survives: so long as nobody lines up at the window all at once. The economist who laid this arithmetic before Congress, in 1960, was Yale's Robert Triffin. For the world to use dollars, America had to keep sending dollars out; every dollar sent out was one more that could be presented for gold. Stop the flow, and the world's money runs dry. Keep it flowing, and someday a line forms at the window. Scholars later noted that his forecast missed the ending's direction. The system burst apart in inflation, not the deflation he feared. But the arithmetic of claims against the safe ran just as he laid it out.
A Decade of Holding On
None of this was a secret. For a decade, Washington and the European capitals ran every device they could think of to keep a line from forming. In 1961, eight central banks pooled their gold to pin the London market price near $35 an ounce. If the open price ran far above the official one, everyone would head for the store's safe. So they held the price sign itself in place. Through the mid-1960s, the holding worked well enough.
Then, starting in 1965, America began pouring inflation into the structure. Spending on Vietnam and the Great Society swelled, the Federal Reserve held rates down to accommodate the bills, and American inflation spread through the payments deficit to surplus countries like Germany and Japan. The storekeeper had left the safe alone and started printing scrip faster. The gold pool that had pinned the price sign gave way in March 1968, after gold poured out of it for months, and its members shut it down. From then on, the major central banks quietly agreed not to present their dollars for gold. The right to present them remained.
Summer 1971: A Line at the Window
In 1971, the patience ran out first. As dollars flooded into Germany that spring, the Bundesbank stopped buying them in early May and let the mark float. In April, the US trade balance went negative. And in early August, France and Britain signaled their intent to convert dollars into gold. The economic historian Michael Bordo names those signals as the trigger for what happened on August 15. The store's biggest customers were finally in line.
On Friday, August 13, Nixon summoned fifteen advisers to Camp David. Among them were Treasury Secretary John Connally, Fed Chairman Arthur Burns, and a Treasury undersecretary named Paul Volcker, who would one day run the Fed himself. Over the weekend they polished a single package for the announcement: a 90-day freeze on wages and prices, a 10 percent surcharge on imports, and the closing of the gold window. Herbert Stein, an economist in the room, later described the mood of that weekend: the advisers, he wrote, took on the attitude of scriptwriters preparing a TV special for Sunday evening. After the special, regular programming would be resumed.
At 9 p.m. on Sunday, the speech took the slot of the popular western Bonanza. One sentence carried the weight.
“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold…” — Richard Nixon, address to the nation, August 15, 1971
The response was rapturous. Markets cheered, and polls found three in four Americans behind the plan. Few people went to bed that night doubting the word “temporarily,” and there was little reason to. Washington went straight to work negotiating the way back.
A New Price Tag on a Locked Door
Four months later, in December, finance chiefs of the ten leading economies met at the Smithsonian Institution in Washington. The heart of the deal was a rewritten price tag. Gold would now stand at $38 an ounce instead of $35, the other currencies would move up against the dollar, and fixed exchange rates would hold. The broken system would be rebuilt on new numbers. Nixon called the deal “the most significant monetary agreement in the history of the world” — more significant, he said, than Bretton Woods itself.
But the window stayed shut. The $38 was a bookkeeping figure, not a price at which any government could actually walk in and collect gold. It was a new price tag on a locked door. The people who bought and sold gold read the difference precisely. The London price reached about $60 by mid-1972 and $90 by early 1973. While the ledger said 38, the market bid more than double.
In February 1973, America rewrote the tag once more, to $42.22. It held for barely a month. In March, the major currencies came off their pegs one after another, exchange rates passed to the market, and the effort to restore fixed rates ended there. No government called it an abolition that day. Everyone simply stopped trying to go back. The paperwork arrived three years later. In January 1976, IMF members met in Kingston, Jamaica, and rewrote the rulebook: floating rates finally became legal, and gold's official price came off the books. The rules caught up with a reality already three years old.
Three Reasons There Was No Way Back
The road back was blocked three layers deep. First, the arithmetic. Reopening the window meant refilling the safe severalfold or calling the scrip back in, and neither had a path. Second, the policy. Bordo points, alongside the design flaws, to two further causes: the anchor country kept running inflationary policy after 1965, and the surplus countries refused to share the burden. The structure was precarious, and people poured fuel on it. Third, the memory. Reopening the window meant returning to gold's discipline, and everyone of that generation remembered, in their bones, what that discipline had done in the 1930s.
From here, the scholars part ways. Charles Kindleberger and colleagues argued at the time that the deficit was no problem at all — the world held dollars because it wanted them, and the system could have run on. But neither side disputes one fact. The attempt to reverse the “temporary” suspension was real, and it really failed.
The money in your pocket tonight has no connection to gold. On the day that connection broke, no government called it an ending. For fifty-five years, we have been living not on an abolished system but on a failed restoration. The town dropped gold from its rulebook long ago, but the storekeeper never changed the sign. Closed for the moment. Back soon.
- Source ↗ Richard Nixon, “Address to the Nation Outlining a New Economic Policy: The Challenge of Peace” (Aug. 15, 1971), The American Presidency Project
- Source ↗ Michael D. Bordo, “The Operation and Demise of the Bretton Woods System; 1958 to 1971,” Hoover Institution Economics Working Paper 16116 (2017)
- Source ↗ Federal Reserve History, “Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls”
- Source ↗ Federal Reserve History, “The Smithsonian Agreement”
- Source ↗ Deutsche Bundesbank, “1973: The End of Bretton Woods”
- Source ↗ Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919–1939 (Oxford University Press, 1992)
- Source ↗ U.S. Department of State, Foreign Relations of the United States, 1969–1976, Vol. III, Document 221 (editorial note on the Smithsonian Agreement)
- Source ↗ Margaret G. de Vries, “Agreement on Exchange Rates: Rambouillet and Jamaica,” The International Monetary Fund 1972–1978 (IMF official history)
- Michael D. Bordo & Barry Eichengreen, “Implications of the Great Depression for the Development of the International Monetary System” (University of Chicago Press, 1998)
- Michael D. Bordo & Robert N. McCauley, “Triffin: Dilemma or Myth?,” IMF Economic Review 67 (2019)
- Robert Triffin, Gold and the Dollar Crisis (Yale University Press, 1960)
- Emil Despres, Charles Kindleberger & William Salant, “The Dollar and World Liquidity: A Minority View,” The Economist (1966)
- Herbert Stein, Presidential Economics (1984)
- Robert Solomon, The International Monetary System, 1945–1976 (Harper & Row, 1976)
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