What happened to the Gold Standard?

After the Second World War, a system similar to the Gold Standard was established by the Bretton Woods Agreements.  In the Agreements the US agreed to fix the price of gold at $35 per ounce.  When the World War II (WWII) ended, the U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold.  Many of the European countries that were involved in WWII were highly in debt.  To satisfy the debts the Europeans transferred large amounts of gold into the United States.  Thus, the U.S. dollar was strongly appreciated in the rest of the world and therefore became the key currency of the Bretton Woods system.

To ensure economic stability and political peace, states agreed to cooperate to regulate the international economic system. The pillar of the U.S. vision of the postwar world was free trade.  Harry Dexter White said, “the absence of a high degree of economic collaboration among the leading nations will…inevitably result in economic warfare that will be but the prelude and instigator of military warfare on an even vaster scale.”

In the 1960s there was a growing U.S. balance-of-payments deficit.  Due to this foreign governments were accumulating large amounts of dollars the aggregate volume far exceeding the U.S. government's stock of gold.  In the second week of August 1971, the British ambassador turned up at the Treasury Department to request that $3 billion be converted into gold.  In response, on August 15, 1971, President Nixon unilaterally imposed 90-day wage and price controls, a 10% import surcharge, and most importantly "closed the gold window," making the dollar inconvertible to gold directly, except on the open market.  He also refused to pay out any of our remaining 280 million ounces of gold.

Today the value of the Gold held is the US is worth $210,585,164,529.42 at today's prices.