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The dollars were worth a small fraction of the gold. It's true that no value was lost — because that value was transferred from the other countries to the US.
by direwolf20 10mo ago
The dollars were worth a small fraction of the gold. It's true that no value was lost — because that value was transferred from the other countries to the US.
- atombender 10mo agoThat doesn't sound right. Money is fungible. Anyone who missed the "window" to convert in 1971 (which major countries like UK, Germany, and France didn't, as far as I can see) still had their dollars. The US-domiciled gold that backed the dollars had always belong the US; so the dollars being an "IOU" makes sense in a colloquial sense, I guess, but it's a gross simplification that misses the broader point about how Bretton Woods affected monetary policy. It shifted the US into being able to maintain a permanent trade deficit, and the US was free to devalue the dollar (effectively the world's default currency) without repercussion, which is good for the US but not for everyone else.
- direwolf20 10mo agoThe dollars were worth much less than the gold. As soon as you couldn't exchange dollars for gold any more, the value of a dollar fell by a factor of several to reflect that.