Also, the Soviet Union had become a large oil producer. It was accumulating U.S. dollars in its foreign reserves since oil is priced in dollars due to fears that the United States would seize its bank accounts as a tactic in the Cold War. The Soviet Union deposited its dollar reserves in European banks, and these became known as eurodollars.
By the 1970s, the United States stockpile of gold continued to decline as
President Nixon's economic policies created
stagflation. Double-digit inflation reduced the eurodollar's value, and more and more banks started redeeming their holdings for gold. The United States could no longer meet this growing obligation.
That's when Nixon changed the dollar/gold relationship to $38 per ounce.6 He no longer allowed the Fed to redeem dollars with gold, which made the gold standard meaningless. The U.S. government repriced gold to $42.22 per ounce in 1973 and then decoupled the value of the dollar from gold altogether in 1976. The price of gold quickly shot up to $124.84.11
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