jan 1, 1971 - US President Richard Nixon abandons Gold Standard

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Nixon took the dollar (which was fixed @35$ x ounce) off gold.
Investors sold off the dollar in fear that Nixon would take it off gold and devalue it.
Nixon was left with two choices:

1) Raise Interest Rates (to attract foreigners to buy US bonds), cut spending, restrain wages & profits, and drive the economy into recession to save the gold convertibility

2) Take the dollar off gold and devalue it, which would be against the bretton woods agreement act (1944)

Of course Nixon chose the second one, essentially devaluing the dollar.

One reason why this speculative attack on the dollar came so late was that international finance was essentially dead before (much due to the shock of 1930, capital controls and the opportunities at home).

Furthermore the US had a payment deficit, as it was importing much more than it was exporting, and this led to a lack of confidence in the dollar.
To counter this the Fed raised interest rates which only managed to drive the USA into a recession.
During this time Nixon was also resorting to deficit spending, which drove inflation higher and "appreciated" the dollar.
That means that the dollar's exchange rate was constant while American prices rose.
This was very bad for foreigners (as they bought essentially "less" money with the same amount of gold), which decided to buy gold with their dollars, causing this huge selling pressure which led to Nixon having to take the dollar off gold.

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