On every dollar, the US government used to print “Redeemable in gold on demand from the US Treasury,” a statement of confidence that the US certifies its liabilities in gold. Nowadays, a dollar can only be redeemed for another dollar from the government–pretty confusing. While the current dollar is not backed by anything, from 1959 to 1973, gold backed the dollar. In the gold exchange standard, the world’s governments attempted to preserve stable exchange rates–often at the expense of domestic economic growth. Ultimately, the adjustments to governments’ economies and political effects were too costly, and the Bretton Woods system collapsed…...
From Fixed to Floating–The Fall of the Bretton Woods System
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