The Longest Temporary Measure in American Finance

On the afternoon of Friday, August 13, 1971, sixteen people met in secret at Camp David, the presidential retreat in the wooded mountains of Maryland, to decide whether the United States should break a promise. The date was Friday the 13th. We checked. Two days later, on Sunday evening, August 15, 1971, the President of the United States went on television and announced that the dollar’s convertibility into gold was being suspended temporarily.

The United States left the gold standard, in the sense that mattered to the rest of the world, on August 15, 1971, when it stopped letting foreign governments swap dollars for gold at $35 an ounce. Fifty-five years later, it is the longest temporary measure in the history of American finance, and it is the monetary system you woke up in this morning. That is more than 20,000 days of “temporarily.” A baby born during the speech now gets AARP mail, wears reading glasses and has strong opinions about the thermostat.

Temporary has had a long and distinguished career in public life. The first federal income tax in American history was introduced during the Civil War as a temporary measure, and it was dropped within a decade of the war ending, which makes it an unusually honest tax. You’ve met the other kind of temporary at home: the “temporary” extension cord behind the TV that has now outlasted two TVs. The gold suspension is that cord.

What happened at Camp David in August 1971?

The sixteen included the President, the Chairman of the Federal Reserve, the Secretary of the Treasury and an Under Secretary named Paul Volcker. Volcker would spend much of the next decade dealing with the weekend’s consequences, like the one friend who skipped the party and still got stuck mopping the kitchen.

The promise they had come to discuss dated from 1944, and it was simple enough that a child could follow it: hand the United States thirty-five dollars and it would hand you an ounce of gold. Not you personally. Americans had been barred from owning monetary gold since 1933, and could only watch, like kids with their noses pressed to the candy store window. But any foreign government that asked could have it.

That one sentence held up the entire post-war financial system. Every other major currency was pegged to the dollar, and the dollar was pegged to gold. The world’s money had, in effect, been left at one coat check. The United States stood behind the counter like the teenager running the coat check at a wedding. It had a stack of claim tickets as thick as a phone book, a rack with a few dozen coats on it, and a smile that says everything’s fine.

Why did the US leave the gold standard?

The trouble with promising to swap dollars for gold is that you can’t issue a lot more dollars than you have gold. The United States spent the 1960s doing exactly that. It paid for a war in Vietnam and a bigger domestic budget without raising taxes enough to cover either. Foreign governments, who could also do the math, started showing up at the window.

Back at the coat check, the teenager has handed out a lot more tickets than there are coats. This is fine, and profitable, and invisible to everyone. It stays invisible right up until several people in line notice each other, glance at the rack, and decide to collect their coats at the same time. The attendant’s backup plan for this moment is to smile harder.

By the summer of 1971 the line was getting restless. The President himself would say, in the speech that ended it all, that “In the past 7 years, there has been an average of one international monetary crisis every year.” A crisis a year, every year, is not a crisis. It is a subscription, and nobody can find the button to cancel it.

On August 11, two days before the meeting, Britain asked for $3 billion in gold to be moved from Fort Knox to the Federal Reserve in New York. At $35 an ounce, that was about 86 million ounces, roughly 2,700 tonnes: a third as much gold as the US Treasury owns today. That isn’t a customer picking up a coat. That’s a customer asking for the coat rack.

Imagine being the attendant that night. The tickets keep coming over the counter, the rack behind you is thinning, and one of the customers is the country that helped you design the coat check. Volcker later put it plainly: “the game was indeed over.” The promise was still being made. It had stopped being true, and the only question left was who would say so first.

What did Nixon actually announce, and what does “temporarily” mean?

Picture the country that Sunday. The No. 1 song in America was the Bee Gees asking “How Can You Mend a Broken Heart.” A first-class stamp cost eight cents. And at 9 p.m., from the Oval Office, the President delivered a speech that preempted Bonanza, the long-running TV Western, which tells you how seriously the White House took the occasion, and how seriously America took Bonanza.

Families who had settled in for an hour at the Ponderosa got the President instead, and a lecture on international monetary policy, which is not what anybody had made popcorn for. On the radio, the Bee Gees were still asking how you mend a broken heart. On television, the government was showing how you break a promise: on a Sunday night, with the markets closed.

The package did three things at once. It froze wages and prices for ninety days, under Executive Order 11615, the first such controls since Korea. It added a ten percent surcharge on imports. And, tucked in the middle like a vegetable in a casserole, it closed the gold window.

In the address, the President said he had directed his Treasury Secretary to “suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability.” That last clause is worth reading twice. Translated from Treasury into English, it means: no, unless we say yes.

Read the whole speech and you’ll find the word temporary doing double duty. The import tax was also announced “As a temporary measure.” That one meant it. The surcharge was removed on December 20, 1971, four months later, in remarks the President delivered from Bermuda, which is where a person goes to keep a promise in comfort.

The other temporary is still running. A temporary measure implies a later measure that puts things back, and no such measure ever came. By December the official price had been nudged to thirty-eight dollars, and by early 1973 the major currencies were floating freely, priced against one another by the market rather than by any promise.

The speech also offered a reassurance. For Americans who bought American-made goods, the President said, “your dollar will be worth just as much tomorrow as it is today.” And it was. Tomorrow was Monday.

Bretton Woods ran twenty-seven years. The pause in it is on year fifty-five. It was like taping a back in five minutes sign to the hardware store door, flipping off the lights and moving to Florida. Fifty-five years later the sign is faded, the key is still under the mat, and the owner sends a postcard every Christmas.

What actually changed when the gold window closed?

Before that Sunday, the number of dollars had an outside limit. It had been bent more than once, but it was real, because a government that issued too many would eventually face a line at the window. The limit was enforced by foreigners with a legal right to metal, which is an unusual and pretty effective form of discipline: a rule that could not be repealed by the people it inconvenienced.

Afterward there was no window and no line. So what limits the number of dollars now? Not gold: the window is closed. Not foreign governments: there’s no line left to stand in. Not the money printer, which has never once asked for a break. What’s left is political: how much inflation voters will put up with, and how much pain a central bank is willing to cause to stop it.

That is a real limit. Volcker proved exactly how real by taking interest rates to about twenty percent at the start of the 1980s: the national version of cutting up the credit cards at the kitchen table while the whole family watches.

But it’s a different kind of thing. One is a rule. The other is a judgment call, made by people, under pressure, who would prefer to be liked. It’s the difference between a speed governor bolted to the engine and a polite sign by the road asking you to be sensible. Both work. Only one of them keeps working when you’re late for work, the coffee’s spilled and the light up ahead just turned yellow.

Was 1971 really the end of the gold standard?

For the dollar, yes. The domestic link had gone in 1933; 1971 cut the last one, the promise to foreign governments. After that nothing in the system was convertible into anything at all, which is what people mean by “fiat.” (What stands behind a dollar now has its own article: What actually backs the dollar.)

One caution, because you’ll see the date on a hundred charts. The 1970s also brought the oil shocks, the mass arrival of women in the paid workforce and the opening of global trade. Not every line that bends after 1971 bent because of the gold window.

Now the bear case against our own position, out loud. Gold standards were abandoned again and again, by many countries, because a fixed money supply pushes shocks into jobs rather than prices. Britain walked away in 1931 in the middle of a run on the pound. Anyone who wants the anchor back has to explain what would stop the next emergency from ending exactly the way the last one did.

That’s a fair point, and notice where it lands: on governments that promise gold and then can’t pay it. It doesn’t touch an ounce held in your own hand, because nobody had to promise you anything. There’s no window to close on a coin in a drawer, and no clause about “amounts and conditions” printed on the back of it.

What does the 1971 gold shock mean for the dollar today?

Nothing exploded that Monday. Nobody was arrested, the banks opened, and the Dow rose 33 points, its biggest one-day gain ever at that point. At home, the speech was “received with enormous approval.” A group of capable people had looked at a promise their country could not keep, concluded that admitting it was cheaper than honoring it, and found one word, “temporarily,” to carry the news.

The point of a hard-money anchor was always that an ounce can’t be issued by a committee on a Sunday afternoon. The rule lasted twenty-seven years. The judgment call has now run for fifty-five, and it has the easier job: a coat check that no longer hands out coats never has to worry about the line.

Here is the claim ticket in today’s money. After inflation, the $35 that bought an ounce at the window in 1971 is about $289 today. The ounce itself cost about $3,997 on October 24, 2026, roughly fourteen times as much. So the claim ticket would now buy a nice dinner for two, and the coat it was for costs about as much as a used car.

The coat check never burned down. It stopped accepting tickets, apologized for any inconvenience, and kept the coats. The sign on the door still says temporarily. Which is why some people, looking at that rack, decided long ago to keep their own coat at home. It’s a little less glamorous. It has also never been lost by a teenager with a roll of tickets.

Sources

• The President’s own words, delivered Sunday evening, August 15, 1971: Address to the Nation Outlining a New Economic Policy, The American Presidency Project.
• The Camp David meeting of August 13, 1971 (sixteen participants), Britain’s request for $3 billion in gold, Executive Order 11615 (90-day wage and price freeze, 10% import surcharge), the December 1971 Smithsonian Agreement at $38 an ounce and the move to floating rates by early 1973: Nixon shock, Wikipedia (a secondary source).
• The first federal income tax, a Civil War measure: Revenue Act of 1861, Wikipedia (a secondary source).
• The $35 an ounce promise dates from the 1944 Bretton Woods system. Twenty-seven years (1944–1971) and fifty-five years (1971–2026) are our own arithmetic.
• Our own arithmetic too: 20,160 days from August 15, 1971 to October 25, 2026; Britain’s $3 billion at $35 an ounce (about 85.7 million ounces) against the Treasury’s 261,498,926 fine troy ounces on August 31, 2026 (US Treasury); $35 in 1971 dollars at CPI-U 40.5 and an estimated 334.4 in 2026 (Bureau of Labor Statistics); and gold at about $3,997 an ounce on October 24, 2026 (gold-api.com). AARP membership is open from age 50.

Questions people actually ask

Why did the US leave the gold standard in 1971?

The United States had issued far more dollars than it held in gold, and foreign governments began asking to swap dollars for gold at $35 an ounce. Rather than honor a promise it could not keep, the US suspended convertibility on August 15, 1971.

What was the Nixon Shock?

The Nixon Shock was the set of economic measures announced on August 15, 1971. They suspended the dollar's convertibility into gold for foreign governments, froze wages and prices for 90 days, and added a 10% import surcharge. It effectively ended the Bretton Woods system.

What happened at Camp David in August 1971?

On Friday, August 13, 1971, sixteen people, including the President, the Federal Reserve Chairman, the Treasury Secretary and Paul Volcker, met at Camp David to decide how to respond to growing foreign demands for gold. Two days later the gold window was closed.

Did Nixon take the US off the gold standard?

Nixon ended the last link, the promise to foreign governments to swap dollars for gold at $35 an ounce. Americans had been barred from owning monetary gold since 1933, so the domestic gold standard was already gone. After 1971 nothing in the system was convertible into gold.

Why did Nixon call the suspension temporary?

The President said he was directing the Treasury Secretary to suspend convertibility temporarily. No restoration followed. The official price was moved to $38 an ounce in December 1971, and major currencies were floating by early 1973. Fifty-five years on, the suspension has never been reversed.

What was the Bretton Woods system?

Bretton Woods was the post-war arrangement, set up in 1944, in which currencies were pegged to the US dollar and the dollar was convertible into gold for foreign governments at $35 an ounce. It lasted about 27 years until the gold window was closed in 1971.

Is the US dollar backed by gold today?

No. Since 1971, the dollar has not been convertible into gold at a fixed price. It is a fiat currency, whose value rests on law, tax obligations and public confidence. Our article on what backs the dollar covers what stands behind it now.

Could the US return to the gold standard?

It would take an act of Congress and a decision about the gold price and how to handle a fixed money supply. Economists disagree about the idea, and gold standards were often abandoned in emergencies. This site describes the history and does not predict policy.

What was the price of gold in 1971?

The official price was $35 an ounce, the rate at which the United States had promised since 1944 to swap dollars for gold with foreign governments. In December 1971, after the gold window closed, the official price was raised to $38. By early 1973 the major currencies were floating and the fixed price no longer held.

What day did the US go off the gold standard?

Sunday, August 15, 1971, when the President announced on television that the dollar's convertibility into gold was being suspended. Americans had already been barred from owning monetary gold since 1933, so the 1971 decision ended the last link: the promise to foreign governments to redeem dollars at $35 an ounce.

What happened to inflation after the gold standard ended?

Inflation rose through the 1970s, and the limit on issuing dollars became a policy judgment rather than a rule. The Federal Reserve eventually pushed interest rates to about twenty percent in the early 1980s to bring it down. Oil shocks and other causes also played a part, so 1971 is one strand, not the whole story.

Was anything in the Nixon shock actually temporary?

Yes. The 10 percent surcharge on imports, announced on August 15, 1971 "as a temporary measure," was removed on December 20, 1971. The suspension of the dollar's convertibility into gold, also described as temporary, was never reversed.

Why did Britain's gold request matter in August 1971?

On August 11, 1971, Britain asked for $3 billion in gold to be moved from Fort Knox to the Federal Reserve in New York. Britain had helped found the Bretton Woods system, so its request signaled that even close allies doubted the US could keep its $35 promise. Paul Volcker later wrote that, at that point, the game was indeed over. The Camp David meeting began two days later.