Why was the gold-backing of $USD discontinued during the Nixon presidency?
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The Bretton Woods system was an agreement in 1944 between the US, Canada, Western Europe, Australia and Japan. The goal was to maintain the exchange rate between the different countries by tying the currency to gold in value.
As the biggest economy, the US kind of lead the show and this created problems for other countries. To keep with the Bretton Woods and keep the exchange rate, other countries would have to devaluate their own currency and in the 70s they were not ready to do so.
In May 1971, Germany left the agreement, their economy grew and the US Dollar to German Mark exchange rate dropped by 7.5% in 3 months. A couple of month later, Switzerland left the agreement too. Countries were also exchanging USD to gold, dropping the value of the USD even more. The US economy wasn’t in a good shape at the time either with high inflation and unemployment rate. Nixon eventually broke the agreement.
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