In August 1971, Richard Nixon made a fateful choice that would reshape international finance forever. Facing pressure from allies demanding gold for their dollar reserves, the president suspended dollar convertibility into gold. This move effectively ended the gold standard that had underpinned global commerce since World War II, creating what economists later dubbed the 'Nixon Shock.'

The crisis stemmed from the Bretton Woods system established in 1944, where currencies were pegged to the dollar and the dollar was convertible to gold at $35 per ounce. By 1971, America's gold reserves were insufficient to cover foreign dollar holdings, forcing allies to question the entire framework. Nixon's decision mirrored a bank run—except the 'depositors' were foreign governments.

The immediate aftermath saw currencies float freely against each other, ending decades of fixed exchange rates. Markets convulsed as the dollar lost its gold backing, though the greenback remained the world's reserve currency through sheer scale and trust. Economists still debate whether this liberated policymakers or created dangerous instability.

Economist Jeffrey Garten, who once worked in the Nixon administration, unpacks this history in the Financial Times' 'The Story of Money' podcast. His firsthand perspective reveals how a secret Camp David meeting fundamentally altered global capital flows, trade dynamics, and the very architecture of international finance that still governs today's markets.