“The Bretton Woods (BW) system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states”. Wikipedia
The panorama faced by countries participating in foreign trade in 1944 was very complicated.
International trade was in disarray. It was based on a complicated system of fixed currency rates, with individual country rates supposedly based in gold, but entirely under the control of individual nations, which revalued and devalued their currencies at will, if they wanted to export/import more or less.
Contributing to the messy situation was the fact that after the war (WWII), European economies were destroyed and in urgent need to recover.
Facing that disorderly panorama, the United States, Canada, all Western European countries, Australia, and Japan, met July 1–22, 1944 “preparing to rebuild the international economic system; while World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States”. Taken from Wikipedia.
Until then, an international system that regulated trade between nations was based, as we said, on fixed rates of currencies vs. gold. Every country would keep its international reserves in gold, and physical gold was used to settle international transactions.
But countries would resort to artificial devaluations of their currency — thus making its exports cheaper — every time they needed to sell more goods and services to outsiders, besides, moving tons of gold around the world was a slow and cumbersome process, plus the gold new production was not nearly enough to support international trade, as the Soviet Union and its satellite-countries kept a sizeable amount of the total existing pool of gold, while not participating in trade outside of their captive market.
So, a more flexible instrument was urgently needed to facilitate international trade growth and countries’ foreign reserves. A brief attempt was made at using the British Pound as a reserve and substitute of gold — given the considerable amount of British trade with its ex-colonies — but the scheme was rapidly abandoned, as the British economy was not strong enough to satisfy the security international trading demanded.
To address the European needs for reconstruction, the IRBD, the International Bank for Reconstruction and Development was created, as well as the IMF, the International Monetary Fund, which would make funds available to correct any disbalances incurred by member countries.
The convertibility of the U.S.dollars to gold, plus the strength of the U.S. economy, together with the willingness of its Government, made the U.S. dollar to be widely utilized by all countries as a foreign reserve unit, and as a trading instrument of worldwide acceptance. Those are the words used by Wikipedia to explain what happened in Bretton Woods in 1944:
“The only currency strong enough to meet the rising demands for international currency transactions was the U.S. dollar. The strength of the U.S. economy, the fixed relationship of the dollar to gold ($35 an ounce), and the commitment of the U.S. government to convert dollars into gold at that price made the dollar as good as gold. The dollar was even better than gold: it earned interest and it was more flexible than gold.”
But, in the late ’60s, the U.S was a net importer and also needed to keep potential domestic inflation on a check, plus to finance its loans and aid around the world, its different wars everywhere in the globe, its international trading’s needs, and its enormous military expenses, the U.S.printed an increasing amount of dollars.
The U.S. then was facing a substantial Balance of Payments deficit, also due to the rising price of oil, and the rising imports from Japan and from Germany (which, naturally did not want to revalue their currencies and make their exports more expensive).
Even into modern times, some U.S. politicians resorted to using “the printing machine”, and incurring in public debt, as a way to finance their projects and to get themselves out of short-term difficulties:
“You never have to default because you print the money”.
– Donald J. Trump
Cited by Bill Bonner’s Diary at his newsletter:https://mail.google.com/mail/u/0/#inbox/FMfcgxwGDNJkqPxdXRpcsPkltnvDfhXr
What a childish way of thinking!
It reminded me of my son when he was 4 or 5 years old:
As it happened, my son had asked me to buy him something (I don’t remember what), which I didn’t want to purchase for him. Without much thinking, I said I would not buy it because I didn’t have any money.
With an expression on his face, which indicated that was not a valid reason, he said to me: “That doesn’t matter. You can go and get money from the machine”.
You see, he had seen me many times before going to an ATM to get some cash, so he probably thought that ATMs were machines put there, for human beings to get cash when they needed it! Without any limits!
But, let us return to Richard Nixon’s era in 1971:
So, at that time the U.S. faced continuing requests to convert dollars into gold, causing the depletion of its gold reserves, which passed from being 2/3 of worldwide availability of gold by 1945 to just 16% in 1970, according to Wikipedia.
That factor, plus the fear of inflation, led the then U.S-President Richard Nixon in August 1971, to sign a Presidential decree, which among other things, unilaterally stopped the U.S. dollar convertibility into gold at $35 per ounce, abandoning, in fact, the gold standard.
At that point, with the dollar being widely used by most countries to settle their international commerce transactions, and with Washington progressively printing more and more new dollars to satisfy a rapidly growing international demand — but also to finance some of its new projects, aid, and military capabilities — the U.S. was in fact, the only occidental country able to just print new money to pay for its Government’s needs. (OMG!)
As a lot of such newly printed money went abroad, not increasing the local monetary supply, the U.S. was able to sidestep — partially at least — inflation, but public debt went through the roof as a result, and, as salaries have not increased (in real terms) in more than 50 years (that despite substantial gains in productivity during that period)…

… families started to enter into more and more debt to finance major purchases (a house, a car, credit cards, electric appliances, etc.), as new generations have learned from their parents, making private debt to also dramatically increase.
Please, notice that it is not casual that the gap between wages’ lack of increase, and productivity gains, began to show right after the abandonment of the gold standard by the USA, in 1971.
Wage increases stopped in 1973. The convergence of rich and poor also came to a halt. The divergence is now greater than it has ever been since the Census Bureau started keeping track in 1967. Bill Bonner Diary, newsletter 02/11/2020.
I got my theory for why that happened to start with:
You see, worker’s average wages had traditionally matched gains in productivity. But then, on October 19, 1973, the Arab OPEC oil embargo took place in response to the U.S. selling military equipment to Israel, which was engaged in a war against Syria and Egypt.
As a result of the oil-crisis created by the Arab embargo, not only most vehicle drivers then faced long queues to fill their car, bus, or truck ‘s tanks, and not only the Gasoline and Gasoil’s — which were severely rationed — prices went up, but the prices of almost everything experienced sharp increases as a result of the rising prices of fuel.
The 1973 Oil Crisis originated fuel rationing and long vehicle waiting for lines at service stations.

Faced with dramatic cost increases outside their control, to reduce and control expenses, Management resorted to freeze and/or reduce the only other major cost-variable over which managers still had some degree of control: payroll expenses, as managers had no control at all over the rising cost of fuel. Please, look again at the graph showing the evolution of real-term wages, above.
So, redundancies, wage/salary reductions, and in general worker’s compensation freezing followed.
And as the public got used to it and given the traditional weakness of the Union’s movements in America, that manipulation of wages and salaries persisted year after year after 1973.
During 20 of my 25 years of insurance’s career, I occupied top Management positions in Colombia, in Miami as regional LATAM’s manager, Brazil, Argentina, Spain, and Panama, also with time spent in New Orleans on a regional LATAM position. During that time, I was forced to look into headcount and payroll expenses as the almost only variables susceptible of generating sizeable cost reductions. And that was perceived by higher management as perfectly O.K., and something I was expected to execute upon.
To maintain its life-style, based on imports from almost all nations, the U.S. had to run substantial amounts of public debt to finance its Balance of Payment’s deficit (and indirectly, also of private debt, as families had to get into additional debt themselves to keep their lifestyle, in the face of the ever-increasing prices), not to talk about the periodical bailouts of the economy or some of its sectors, or the occasional tax-cuts, when the Republicans were in power. So, more and more dollars were printed, increasing debt to stratospheric levels:
The U.S. government’s public debt is now more than $22 trillion — the highest it has ever been. The Treasury Department data comes as tax revenue has fallen and federal spending continues to rise. The new debt level reflects a rise of more than $2 trillion from the day President Trump took office in 2017. Wikipedia, Feb 13, 2019
On top of that, there was also an enormous increase, as we said, of the private debt incurred by the U.S. private citizens, estimated at $ 27 billion, according to Wikipedia.
It is also necessary to say that, as U.S. Universities and other institutions of higher education also increased substantially their tuition fees, so, prospective students had to incur long-term debt to complete their education, which partially helps to explain the marked increase in private debt.

But, paradoxically, highly compensated individuals earned more and more in America after 1973, and up to our days:
…” why CEOs earn 300 times the average worker, instead of 30 times, like in Europe? — or why “hedge fund managers” earn a thousand times what teachers do?”. Wikipedia
I have no doubts: If we want the U.S. economy to continue prospering, and if we want to stop the advance of socialism in America, we have to pay more to the U.S. mid-level employees and workers.
It is against nature and common sense, that we watch companies and high earners make thousands, billions of dollars every year, and, at the same time, observe the kind of income inequality described.