It's been over 50 years since that fateful day forever transformed America and the world.

Here's what really happened.

It's been rightly said that "he who holds the gold makes the rules."

After World War 2, the US had the largest gold reserves in the world by far. Along with winning the war, this let the US reconstruct the global monetary system around the dollar.

The new system, created at the Bretton Woods Conference in 1944, tied the currencies of virtually every country in the world to the US dollar through a fixed exchange rate. It also tied the US dollar to gold at a fixed rate of $35 per ounce.

The dollar was said to be "as good as gold."

The Bretton Woods system made the US dollar the world's premier reserve currency. It forced other countries to store dollars for international trade or to exchange them with the US government for gold.

However, it was doomed to fail.

Runaway spending on warfare and welfare caused the US government to print more dollars than it could back with gold at the promised price.

By the late 1960s, the number of dollars circulating had drastically increased relative to the amount of gold backing them. This encouraged foreign countries to exchange their dollars for gold, draining the US gold supply at an alarming rate.

As a result, the US gold supply dropped by more than half, from 574 million troy ounces at the end of World War II to around 261 million troy ounces in 1971.

The situation pressured the US government to make a drastic decision.

It could do nothing and watch its gold holdings evaporate, which would mean losing enormous financial and geopolitical power. Or it could default on its promise to redeem the dollar for gold.