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Economic Commentary

Credibility Begins with a Clear Commitment to Price Stability

In the summer of 1971, the United States suspended the limited convertibility of the dollar for gold. Convertibility had not been operational for some time, except to foreign governments by special arrangement. Nevertheless, with the suspension came the recognition that America had cast aside its last formal commitment to gold convertibility and was now operating on a purely fiat currency. The idea of the dollar first being one-twentieth and then one-thirty-fifth of an ounce of gold, then being “worth” what a dollar would buy, without reference to some more basic standard of value, was a gradual process.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Jordan, Jerry L. 1993. “Credibility Begins with a Clear Commitment to Price Stability.” Federal Reserve Bank of Cleveland, Economic Commentary 10/1/1993.