On August 15, 1971, US President Richard Nixon ended the gold

convertibility of the US dollar and simultaneously ended the Bretton Wood

system which had governed international monetary policy since the end of the

Second World War. The system which replaced

Bretton Woods wasn't built on formal treaties and conferences. It was a highly

informal system that for the most part still exists today. Learn more about the Petroro Dollar System, how it came to be and

how it works on this episode of Everything Everywhere Daily. Book your ticket to happiness with Sun Express Airlines. This episode is part four in a series on the International Monetary System.

If you haven't yet listened, you can go back and listen to the first three episodes, which

were the history of money, the gold standard, and the Bretton Wood system.

When we last left our international monetary system,

Richard Nixon had ended the Bretton Wood system in 1971

by ending the convertibility of dollars for gold.

The entire Bretton Wood system was built on everyone pegging their currency to the U.S. dollar

and the U.S. dollar being pegged to gold at $35 an ounce.

The reason why Nixon did this was that the US dollar

had become overvalued and the United States didn't have enough gold reserves to

cover the dollars that were in circulation. Here I want to take a brief detour to talk about the economics

of one currency being the global reserve currency. The problem with this was

identified as early as 1959 by the Yale economist Robert Triffin.

Triffin figured out that if one currency were to become the world's reserve currency

like the US dollar was after Bretton Woods, the system would eventually implode.

Whatever the reserve currency was would be in demand all over the world.

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