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The Gold vs. Commodities Dynamic: When the Bretton Woods system was still in place, the U.S. dollar was pegged to gold at a fixed rate of $35 per ounce. Other commodities, like oil, wheat, and copper, were priced in dollars but were not directly pegged to gold.

When you observe gold prices rising rapidly compared to other commodities, it indicates that gold was becoming scarcer relative to the U.S. dollar, while other commodities remained more plentiful or stable in their dollar pricing. This phenomenon aligns with the idea of a relative shortage of gold versus non-gold commodities in the dollar-denominated world.

Gold Price vs. Commodity Prices:

Rising Gold Prices: The rising price of gold compared to other commodities suggests that market participants were increasingly skeptical about the U.S.'s ability to maintain the gold convertibility of the dollar. As a hedge, they preferred to hold gold over dollars, driving up gold’s value.

Stable Commodity Prices: Meanwhile, other commodities didn’t see the same price surge because they were not directly tied to the convertibility mechanism. The demand for gold as a safe asset intensified, but the demand for commodities remained tied to actual economic use and trade (MWG Note: hence the importance of the population growth in this phenomenon in the 1970s while we have not seen proportionate commodity price increases/inflation even as gold rose sharply in the post-1999 period).

Shifting the "Fault": Instead of seeing the collapse of Bretton Woods purely as a result of U.S. monetary policy (e.g., money printing or fiscal deficits), this perspective introduces a broader view:

Systemic Pressure: The Eurodollar market created additional, uncontrolled monetary expansion outside of U.S. regulatory oversight.

Global Imbalance: This external dollar creation led to a global imbalance where the international demand for gold (as a safe and stable asset) outstripped supply, precipitating a crisis of confidence in the dollar.

Conclusion: Incorporating the empirical evidence of gold's price surge against other commodities strengthens the argument that the breakdown of Bretton Woods was not just about U.S. policy but also about the unintended consequences of global dollar liquidity. The Eurodollar market amplified claims on U.S. gold, causing a relative scarcity of gold to dollars, which became evident as gold prices diverged from other commodity prices. This nuance shifts part of the "fault" from purely U.S. actions to a broader systemic issue involving global financial innovation and liquidity mismatches.

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