1971 – Gold Standard Abandoned

In 1971, President Richard Nixon heads a nation in a deep economic recession. During fiscal years 1970 and 1971, his administration ran a deficit of $25 billion (enormous for the time), prices were rising rapidly and a gold run had developed. The 1971 dollar is tied to the “gold standard” -- the standard economic unit of account is a fixed weight of gold. Under the gold standard, governments on a gold standard agree to redeem their notes to other governments in gold, thus sharing a fixed-currency relationship.

Nixon responds to the recession by breaking ranks with foreign central banks. He “floats” the dollar (severs its direct tie to gold) and simultaneously freezes most U.S. wages and prices. (© AP Images)