WTF Happened In 1971? [By a website of the same name.]
In the late 1960s the US tried to have both guns and butter. It fought the Vietnam war abroad and launched the welfare state at home. They couldn?t afford it, so they printed and borrowed.
For centuries, all currencies (except for a few short lived ?experiments?) had been based on gold. After WWII the US had lots of the world?s gold, and other countries had too little. After the Bretton Woods agreement of 1944, other countries based their currency on the US dollar, which in turn was based on gold. But in the late 1960s the US was printing too much money to be able to back its currency with gold, and were running out of gold. So in 1971 President Nixon closed the gold window. No longer could other nations exchange fistfuls of US dollars for gold. It affected the whole world.
After 1971, all currencies in the world have been entirely paper affairs. Free of the constraint of convertibility to gold, governments could print as much as they wanted, subject only to the new constraints of inflation and trade balances. This gave the money printers, asset shufflers, and banks the upper hand economically. Why work, if you can just manufacture money or know when to buy or sell on borrowed (i.e. newly manufactured) money?
Real workers suffered. Bargaining power flowed to the money men. Hardly anyone knows this today, yet it shapes our social and economic landscape.
A few interesting graphs: [...]