Since August 15, 1971, the US dollar has been completely severed from gold.

President Richard Nixon suspended the most important component of the Bretton Woods system, which had been in effect since the end of World War II. Nixon announced that the US would no longer redeem dollars for gold for the last remaining entities that could: foreign governments. Gold redemption had been made illegal for everybody else, so this action finally ended any semblance of a gold standard for the US dollar.

In Crisis and Leviathan, Robert Higgs showed how in the twentieth century the US government grew in size and scope primarily during crisis periods like wars or economic depressions. The powers gained during those periods were often advertised as “temporary,” but history shows that governments rarely relinquish powers. This “ratchet effect” applies to the way Nixon “temporarily” suspended gold redemption in 1971—the resulting regime of unbacked fiat dollars remains in effect today.

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Newman is an assistant professor of economics and finance at Bryan College.