That last sentence at the end of the paragraph I highlighted above the image of the Ten Dollar bill and the bar of gold isn’t completely true. After The Great Depression hit in 1929 the Federal Reserve Bank started raising interest rates in an effort to make dollars more valuable and to try and discourage people from further depleting the U.S. gold reserves. President Roosevelt required banks to turn their gold reserves into the Federal Reserve and for a time private ownership of gold by U.S. citizens was outlawed by the Gold Reserve Act implemented on January 30th, 1934. Nor could gold be exported.
In 1960, the U.S. held $19.4 billion in gold reserves, including $1.6 billion in the International Monetary Fund, which was enough to cover the $18.7 billion in foreign dollars outstanding (trade debt).
As Americans bought more imported goods with dollars, the trade deficit grew and foreign governments became anxious that the U.S. would no longer back up the dollar with gold. When the Soviet Union became a large oil producer it accumalated large dollar reserves and out of fear that the U.S. would seize these assets as a cold war tactic, they deposited the reserves in European banks; this was the birth of what became known as “Eurodollars”.
By 1970, the United States only held $14.5 billion in gold against foreign dollar holdings of $45.7 billion. As more banks started redeeming their holdings for gold, the United States could no longer meet this growing obligation. On August 15th, 1971, Nixon changed the dollar/gold relationship to $38 per ounce and no longer allowed the Fed to redeem dollars for gold, effectively making the “gold standard” meaningless.