On August 15, 1971, Richard Nixon appeared on American television to announce a drastic reordering of the postwar economy. He closed the so-called gold window, ending the convertibility of dollars held by foreign central banks into US gold. Other central banks were no longer allowed to exchange their dollars for American gold. With a short speech, he brought down the monetary order that had underpinned the world economy since World War II: the Bretton Woods system.

The United States had put the dollar at the center of the system. The country promised to redeem dollars for gold at a fixed price. Other states tied their currencies to the dollar. But the Vietnam War drained resources, drove up spending, and sent new dollars out around the world.

The decision to abandon the dollar’s gold link was driven in large part by these pressures. As the decade came to an end, the United States attempted to finance both the war and growing Great Society programs without fully paying for them through taxation. Congress did eventually enact a temporary income-tax surcharge in 1968, but widening deficits and expansionary monetary policy had already contributed to inflation. The war also diverted labor, steel, fuel, transportation, and other real resources from the civilian economy, helping to overheat the economy and send additional dollars abroad. From 1965 to the spring of 1968, the American presence in Vietnam grew from about 24,000 military personnel to about 550,000.