At Bretton Woods, New Hampshire, in 1944, forty-four Allied nations had built a new monetary architecture for the post-war world: the US dollar would be fixed to gold ($35 = 1 oz), other currencies fixed to the dollar, and the IMF and World Bank would manage the system. Through the 1950s and early 1960s the arrangement gave global trade and growth a remarkable stability. But US spending on the Vietnam War (escalating from 1965), President Johnson's Great Society welfare programmes and rapidly rising oil imports swelled the supply of dollars. Meanwhile the reconstruction of Germany and Japan reshaped global demand for the dollar: the United States had been running balance-of-payments deficits since 1959, its gold reserves were shrinking, and dollars held by foreign central banks already exceeded the entire US gold stock several times over.

By the summer of 1971 the system was struggling. In May Germany floated the Deutsche Mark. In late July and early August France and Britain announced their intention to convert dollar reserves into gold — Britain's single demand of three billion dollars was about a quarter of US gold reserves. Over the weekend of 13-15 August, Nixon held a secret meeting at Camp David with fifteen advisors including Treasury Secretary John Connally, Budget Director George Shultz and the young Federal Reserve Vice Chair Paul Volcker. On the evening of 15 August — a Sunday, with European markets closed — Nixon announced the "New Economic Policy": the dollar's convertibility into gold was suspended, a 10 per cent surcharge was imposed on imports, and a 90-day freeze on wages and prices was declared. In part of the address Nixon blamed speculators for "devaluing the dollar" but the truth was the opposite: abandoning the system devalued it.

The short-term aftermath was dramatic. In December 1971 the Smithsonian Agreement devalued the dollar by about 8 per cent and tried to restore fixed parities; it lasted 14 months. In March 1973 the G10 accepted floating rates. The OPEC oil embargo of 1973-74 quadrupled oil prices, and because oil was now sold only in dollars, the reserves of Saudi Arabia and the Gulf exploded — the petrodollar era. In the same decade the West experienced a combination it had never seen: high inflation together with high unemployment and stagnant growth — stagflation. According to the Phillips curve these things were not supposed to coexist; the prevailing Keynesian framework was shaken. Paul Volcker's decision in 1979, as Federal Reserve chair, to push interest rates to 20 per cent and break inflation, and the Reagan-Thatcher transformation of the 1980s, are direct consequences of this crisis.

The long-term legacy is deeper still. Removing the gold anchor gave states wider room to print money; global finance from the 1980s onward experienced explosive growth (currency-linked derivatives, speculation built on floating rates, the volume of financial flows running many times the volume of trade flows). The US balance-of-payments deficit became structural, but that same deficit became the infrastructure of dollar hegemony: into the 2020s the world borrowed in, held reserves in and traded in dollars to an ever greater degree. In the historians' assessment, 15 August 1971 is not merely a technical decision but the end of the economic architecture of the second half of the 20th century and the beginning of the system we still live in. The measure Nixon called "temporary" remains in force.