Since the end of the Golden Standard in 1971, the world economy has been using paper money, which is not backed by anything, not a single physical asset. German economist Thomas Meyer spoke in an interview about what this led to.
US President Richard Nixon signed a decree on August 15, 1971 stating that the US dollar is no longer tied to gold. From this moment, a new era of world money began. During a speech on American television, which has already become historic, he told the country's citizens that decoupling the dollar from gold would protect the currency from speculative attacks. As a result, the world price of gold has ceased to be fixed.
Thus, it turns out that with just one decree, the international monetary system was released from binding to the yellow precious metal. The pegging of the dollar to gold was introduced 75 years ago after the signing of the agreement on the creation of the Bretton Woods monetary system.
It is worth recalling that, first of all, the French did not trust the American politicians who were supposed to finance the war in Korea and Vietnam. Therefore, Paris decided to return their dollars to the Americans, and instead take the gold that was stored in the United States. After this event, the American authorities were afraid that other countries would want to exchange paper dollars for hard gold. For this reason, politicians in Washington decided to abandon the opportunity to exchange dollars for gold.
According to Thomas Mayer, who previously worked at Deutschen Bank, “US President Richard Nixon did not fully understand what his decree on the abolition of the dollar's link to gold could lead to. The world monetary system has been turned upside down. ” If earlier the world monetary system could boast of its stability due to its attachment to physical precious metals, now paper money can be printed in almost unlimited quantities, since they are not tied to any physical asset. Without a stable financial system, stable economic development is impossible.