Modern monetary history

Bretton Woods and the Nixon Shock: 1944–1973

The end of dollar-to-gold convertibility was a turning point, but the postwar monetary system did not change completely in a single night. The agreement, its operation and its collapse form a multi-stage history.

By The Golden Dow · Last updated October 14, 2026 · Editorial policy

1944: the Bretton Woods agreement

Delegates from 44 nations met in Bretton Woods, New Hampshire, in July 1944, before World War II had ended. They agreed on institutions that became the International Monetary Fund and the World Bank, seeking more stable exchange rates, international cooperation and postwar reconstruction. [1]

The system linked participating currencies to the U.S. dollar at fixed but adjustable exchange rates, while the dollar was linked to gold at $35 per troy ounce. This was a dollar-centered gold-exchange arrangement, not the same as the pre-1914 classical gold standard. [1]

1958 onward: operation and growing pressure

Federal Reserve History dates the system's full operation to 1958, when currencies became convertible for international settlements. Dollar-gold convertibility supported confidence in the arrangement. Persistent U.S. balance-of-payments deficits eventually left foreign-held dollars exceeding the gold stock available to honor redemption at the official price. [1]

The pressure was not merely a mechanical comparison of two totals. Confidence, inflation and the possibility of a run on U.S. gold also mattered. Efforts to manage gold markets and international reserves did not resolve the underlying problem permanently. [2]

August 15, 1971: the Nixon Shock

President Richard Nixon suspended the conversion of dollars into gold for foreign monetary authorities. His announcement also included domestic wage and price controls. The “gold window” closure ended a central commitment of Bretton Woods; it was not the removal of a general gold-redemption right held by ordinary U.S. consumers at that time. [2]

1971–1973: the transition was not instantaneous

The December 1971 Smithsonian Agreement attempted to preserve a revised fixed-rate framework. Further pressure followed, and by March 1973 major currencies were floating. It is therefore misleading to say that every major currency became freely floating overnight on August 15, 1971. Gold convertibility, fiat money and floating exchange rates describe related but different features of a monetary system. [2]