This week marks the 50th anniversary of “the weekend that changed the world”, when the US president Richard Nixon suspended the dollar’s convertibility into gold at a fixed price and rang down the curtain on the Bretton Woods international monetary system. The subsequent half-century brought many surprises. From a monetary standpoint, one of the greatest was the dollar’s continued dominance as a vehicle for cross-border transactions.
Under Bretton Woods, the dollar’s supremacy was readily explicable. The financial position of the US coming out of the second world war was impregnable. Changes in the price at which dollars could be converted into gold were unthinkable, first because of that financial strength and then, as the country’s monetary position weakened, because of the possibility that one devaluation would create expectations of another.
Many thought that Nixon’s move would diminish the dollar’s international role. With the…
