Dollar System Eroding Slowly, but Still Dominant

Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)Tuesday, October 13, 2026Inter Press Service KUALA LUMPUR, Malaysia, October 13 (IPS) - The protracted demise of dollar-gold convertibility and associated fixed exchange rates did not end dollar hegemony. With crucial and timely help from political allies, confidence in the dollar system has persisted, albeit much diminished. Jomo Kwame SundaramContingency planning? On August 15, 1971, President Richard Nixon announced that the US would no longer convert dollars into gold, as promised under the 1944 Bretton Woods (BW) agreement. But the BW payments arrangements and the US promise of dollar convertibility to gold were not sustainable. As Robert Triffin noted in 1960, the system was ‘failing by design’ from the outset, which US authorities denied and refused to address. Vietnam War spending, rising inflation, and a run on US gold reserves forced this decision after allied Western central banks quietly gave up defending the gold-dollar peg in 1968. Decades later, then-US Undersecretary for Monetary Affairs Paul Volcker revealed he had initiated a Treasury working group in 1969. As the US balance of payments was already proving uns...