This ground-breaking speech ("The Challenge of Peace") by US president Richard Nixon was the prelude to the end of the Bretton Woods System from 1944. Before the 'Nixon shock', foreign currencies were comfortably put into a defined relation to the US-$. US Congress set 1$ to one troy ounce (approx. 31g) of gold. By declaring executive order No. 11615, USA unilaterally cancelled this international agreement; the gold standard was nullified and hence the US dollar became a fiat currency (='paper money' or 'debt money').
By the way, this is unlawful:
"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."
(United States Constitution, Article I, section 10, clause 1)
Of course, this clause is older than the Greenbacks which became legal tender by law in 1861 (when civil war started) and which were not backed by gold or silver but the 'credibility' of the U.S. government had to be enough.
Aftermath of the Nixon Shock:
The official end of the Bretton Woods System came in 1973 when countries decided to let their money freely float and the gold price suddenly started to sky rocket. After all, USA managed to keep their currency up and connect it to the most important natural resources like oil. In that sense, the currency is mainly covered by petroleum (and the pressure USA can put onto OPEC countries and others) - the petrodollar was born which so far, could preserve the supremacy of the Unites States. Also prices for oil and gas exploded.
Attempts by Saddam Hussein (former president of Iraq) to exchange petroleum with 'petroeuro' or 'petroyen' failed like attempts by Muammar Gaddafi (Libya) to install a gold dinar system. In 2011, Russian president Putin declared in public that from now on, Russa and China will exclusively trade their goods in rubel and renminbi (aka yuan, which is its basic unit).
Prelude (?!):
It is often stated that French president Charles de Gaulle (Pres. from 1959-69) forced Nixon to end the gold standard when in 1965, he announced his intent to convert US-dollars owned by his country into gold. The IMF (international money fund) stated that in 1966, foreign countries owned about 14 billion US-$ meanwhile USA held gold of about 13.6 billion bucks in total, whereas only 3.2 billion of them were designated to convert to foreign currencies.
Indeed, the French called the Bretton Woods System "America's exorbitant privilege" and after de Gaulle sent a battle ship over the Atlantic Ocean to pick up some gold, other countries followed...
More infos e.g. on:
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(I tried to improve the sound by decreasing the background noise using audacity.)
The full version can be found here:
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This clip was uploaded for historical & educational purposes only.
