The Dissolution of the Bretton Woods System Evidence from the Nixon Tapes August – December 1971

In July 1944, representatives of the Allied nations gathered in BrettonWoods, New Hampshire and signed an agreement to rebuild the internationalmonetary system. From 1946 until August 15, 1971, major currencies were fixed tothe US dollar, and the dollar was, at the same time, convertible to gold at the rate of$35 per ounce. On August 15, 1971, without consulting the leaders of the rest of theworld, Richard Nixon made the decision to end convertibility of the dollar into goldand allow the dollar to float against gold and world currencies.The Nixon tapes, the series of personal recordings made during thepresidency of Richard Nixon and since made public, provide a unique opportunity todetermine why the administration made the decision in this way. The tapes alsoprovide unique insights into the reactions of the rest of the world following thisdecision and how the negotiations that rebuilt the system of international finance tookplace. It has become clear from these tapes that economic outcomes weresubordinated in favor of political issues, as the Nixon administration viewed therenegotiation of the system of international finance as an issue of national security.The primary concern of the administration was always the 1972 election, and thatovershadows the economic theory that surrounded the decisions being made.