In July 1944, with World War II raging on, 730 delegates from all 44 allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference. Their primary goal was to rebuild the international economic system through a series of rules, institutions, and procedures. The delegates spent three weeks deliberating upon and eventually signing the Bretton Woods Agreements.

The Bretton Woods system called for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar. If you were a favored bank you could exchange your dollars for gold at a fixed rate. This anchored the monetary system.

On August 15, 1971(“The Anniversary”), the United States, under Richard Nixon, unilaterally ceased convertibility of the dollar to gold. This meant that the dollar became an all out “fiat currency,” sustained by nothing but the promise of the federal government. Known as the Nixon Shock, this action meant that the United States dollar would be the sole backing of currencies and a reserve currency for the world.

Our government and governments around the world have been on a spending binge. When the central bank is able to suppress interest rates to zero and when the government can finance its debts with foreign central banks at negligible interest rates—there’s no check on these debts

What about you? Are you on a spending binge? Is your balance sheet “AAA”? Are you in control of your cash flow? Here’s a test: When you go out on Monday to celebrate the anniversary, will you pay with cash?

Happy Anniversary!