Nixon closes the gold window
On Sunday, August 15, 1971, President Nixon announced on national television that the United States would 'temporarily' suspend the convertibility of dollars into gold. The Bretton Woods system collapsed over the next two years as other currencies floated. For the first time in history, every major currency was pure fiat — backed by nothing but the issuing government's word. The decoupling created an immediate problem for global oil pricing: oil exporters had been receiving dollars whose purchasing power they could no longer convert to gold. The petrodollar deal that emerged three years later was, structurally, the replacement for the gold backing the closure had removed.
The Nixon Shock is also covered in the Money and Debasement timelines because it sits at the intersection of three different stories. Here, its energy implication is the central one: the United States needed something to underwrite the dollar's reserve status, and oil was the candidate that was actually available.
04 · The Petrodollar
When Nixon closed the gold window in August 1971, the dollar lost its commodity backing. It immediately gained a new, less visible one. In 1974, Saudi Arabia agreed to price all its oil exports in U.S. dollars in exchange for American security guarantees and a Saudi commitment to recycle oil revenues into U.S. Treasury bonds. Every country that wanted oil now needed dollars. Sovereign wealth funds emerged as the warehouses of recycled petroleum money. The petrodollar system was as load-bearing for the post-Bretton-Woods financial order as gold had been for the previous one — and far less visible.
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