ELI5: Explain Like I'm 5

Nixon shock

Well kiddo, do you remember how we use money to buy things that we need or want? Money is super important and it makes everything in our lives go round. But do you know how our government makes sure our money is worth something and that it doesn't lose its value?

A long time ago, countries agreed that their money was worth a certain amount compared to other countries' money. For example, if one US dollar was worth 100 Japanese yen, then it was agreed that it would always stay that way. But in 1971, the president of the United States, Richard Nixon, shocked everyone by saying that he didn't want to play the same game anymore.

He made an announcement, called the Nixon Shock, that said the US dollar was no longer going to be worth a specific amount compared to other countries' currencies. Instead, it was going to float freely, which means that its value would be determined by the market - kinda like a see-saw that goes up and down based on how many people want it.

This was a very big change, and it worried a lot of people because they thought that other countries might not trust the US anymore or that it might make it harder for them to buy things from other countries. But Nixon thought that this was the best decision at that time because it would help the US economy grow.

And that's the Nixon Shock for you, kiddo. It was a big change in the way people thought about money and how it was valued compared to other currencies. But like everything else, it had both good and bad consequences, and it's now a part of history that we can learn from!