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Yes, this is part of the reasoning Nixon ditched Bretton Woods and unpegged the dollar from gold.
by DrAwdeOccarim 6y ago
Yes, this is part of the reasoning Nixon ditched Bretton Woods and unpegged the dollar from gold.
- alexmingoia 6y agoI think it’s worth pointing out that abandoning the gold standard had little to do with gold and everything to do with the practice of fractional reserve banking. The government simply had more foreign dollar debt than they had backed by gold, and foreign governments began to demand redemption of their dollars for gold. It wouldn’t matter what the reserve is, fractional reserve banking inevitably results in bank runs. Nixon had to either devalue the dollar or completely default, and he chose to default and abandon fractional reserve banking altogether (though at the time promised it was only a temporary suspension of gold redemptions).