How the system worked
FACT. Under Bretton Woods, participating countries pegged their currencies to the US dollar, and the United States undertook to convert dollars into gold at $35 an ounce for foreign official holders — other governments and central banks. American citizens were not part of that convertibility. The effect was a dollar-centred system with gold at one remove: everyone else held dollars, and dollars were, in principle, a claim on US gold. The Federal Reserve's historical material and a 2026 Fed staff note on its balance sheet both document the arrangement and how gold appeared in the accounts.
Describe this illustration: An ornate bank redemption window with its shutter pulled almost closed by a hand, a small stack of gold coins behind the shutter and a folded banknote left on the counter in front of itHide description: An ornate bank redemption window with its shutter pulled almost closed by a hand, a small stack of gold coins behind the shutter and a folded banknote left on the counter in front of it
An original Capstone Metals illustration of the single most consequential monetary event of the last century. Under Bretton Woods, foreign governments could exchange dollars for gold at a fixed official price; in August 1971 that redemption was suspended, and the fixed link was never restored. What remained was the note on the counter — money that works because law and confidence say it does, not because anything can be claimed for it. That is a documented historical fact, and it is the starting point for understanding both modern monetary policy and why reserve institutions still hold metal.