France looked at the huge pile of paper notes sitting in their vaults, for which real French products like wine and cheese had been traded, and notified the United States government that they would exercise their option under Bretton Woods (agreement following WWII) to return the paper notes for gold at the $35 per ounce exchange rate. Of course, the United States had nowhere near the gold to redeem the paper notes, so on August 15th, 1971, Richard Nixon “temporarily” suspended the gold convertibility of the US Federal Reserve Notes. This caused the dollar to plunge by some 40 percent against major trading currencies like the Deutsche Mark and the Japanese Yen.
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