1971 - 1973

End of the gold-dollar standard and switch to a floating exchange rate system

End of the gold convertibility of the dollar in 1971. Currency exchange rates are no longer fixed as from 1973. In 1944, the Bretton Woods agreements had set up a system of fixed exchange rates between currencies and gold or the dollar, the keystone of the system being the possibility of converting, at a fixed parity, the dollar into gold ($35 per ounce). However, from the 1960s, this system was under-mined by the external deficits of the United States, which imported more than it exported and fin-anced the difference by creating money. The quantity of « Eurodollars » (i.e. dollars held by economic agents who are not residents of the United States) in circulation worldwide grew rapidly, especially as banks outside the United States (in particular in Europe) started extending loans in dollars. The gold reserves of the Fed (the central bank of the United States) became clearly insufficient for converting dollars according to the official parity. These contradictions led President Richard Nixon to decide, on 15 August 1971, to suspend the gold convertibility of the dollar, then to devalue it several times. In March 1973, a new foreign exchange crisis led to a generalized floating of currencies: most currencies had « floating » exchange rates that varied from day to day. In 1976, the Jamaica Accord recognised this situation and the end of any reference to gold in the international monetary system.