The most crucial effect of the “Nixon Shock” was that it created a floating exchange market whereby exchange rates for foreign currencies were set by the free market, rather than by governments. By early 1976, all major world currencies were floating. Thus, monetary policy was completely altered. Under a fixed rate system, governments could directly control monetary policy by changing the exchange rate of their currency. Creating fiat currency (currency that is not backed by any commodity and has value simply because a government has declared it) meant that monetary policy could now be controlled by simply printing more money. Economist Paul Krugman, winner of the 2008 Nobel Prize in Economics, writes that there are “powerful advantages to such an unconstrained system… but also risks.”  It gives governments a straightforward way to deal with recessions – by printing more money, which Paul Krugman suggests was the primary reason the stock market crash of 1987 did not create a fall in the real economy. However, a floating system creates volatility in the exchange markets. Convertibility between currencies can change rapidly and significantly on the open market. Additionally, the system left monetary managers of governments “free to do good also… free to be irresponsible.” 
Another consequence of the breakdown of the Bretton Woods system was the end of the Sterling Area, a measure instituted at the outbreak of World War II as a wartime policy in which Britain and its colonies and many present-day Commonwealth nations set up to protect the external value of the pound sterling. Beginning in 1947, with Egypt, and continuing until 1971, some countries left the sterling area, however most remained on it until June 1972. Then, the British government established exchange controls and dissolved the sterling area in phases until 1980. The biggest diminishment in the sterling area occurred in 1973, when Britain joined the European Economic Community.
In Europe, following World War II, many Western European nations began working together for mutual economic gains and interdependence. The European Economic Community, or EEC, (the precursor to the European Union) was established in 1957. These nations “[grew] accustomed to currency stability under the Bretton Woods monetary system” and the mutually dependent trade between themselves.  This currency stability was challenged by the balance of payments situation in the 1970s and the eventual breakdown of the Bretton Woods system. The resulting policy agreed upon in the EEC, called the “Snake in the Tunnel,” was to create regional monetary stability. It allowed EEC member nations’ currencies to float only within a narrow band. Thus, the breakdown of Bretton Woods “pushed European leaders one very large step closer toward economic integration on the continent.”  The Snake in the Tunnel was “generally regarded as a failure”  and was ended in 1979 and replaced with the European Monetary System. Regional monetary policy continued and, in December 1995, the Euro was eventually adopted as a single, regional currency.
Additionally, the end of the gold standard in the US “initiated an incredible bull market in gold itself.”  Under Bretton Woods, the US dollar was pegged at $35 per ounce. Immediately at its abrogation, gold prices began rising. Within three years, the price of gold had risen to over $180 per ounce. At the writing of this, gold is valued at over $1740 per ounce and continuing to rise.
Another result of the collapse of Bretton Woods was the abandonment of capital controls. The Bretton Woods system had strict controls to protect exchange rate currency pegs that became unnecessary after its collapse. Consequentially, as The Economist puts it, “capital started flowing round the world at an ever faster rate, with the finance sector taking a cut at every stage.” 
In 1969, the International Monetary Fund (IMF) created Special Drawing Rights (SDRs) to support the Bretton Woods’ fixed exchange rate regime.  However, with its collapse and the floating exchange rate system, the SDRs’ significance was greatly diminished.
Bretton Woods’ collapse also influenced the creation of the Group of Six (later the G-7), an informal collection of the six richest industrialised countries.  The first summit was held on 15-17 November 1975 in Rambouillet, France. The six nations (the US, UK, France, Germany, Italy and Japan) came together to discuss monetary and economic policy, and to resolve differences among the nations.
Looking back 40 years later, we can still see the significance of this major event in international political economics. Today, some opinion leaders are arguing for a new monetary system and for a return to the gold standard. Libertarians, such as US Representative Ron Paul of Texas and David Boaz of the Cato Institute, Austrian School economists, and others have come out in favour of a renewed gold standard.  However, many economists agree that a return to the gold standard is not a good idea. One thing is evident, the debate will continue to go on.
1. Krugman, Paul 1996, ‘The Gold Bug Variations’, Slate, 23 Nov, viewed 14 Aug 2011, < http://www.slate.com/id/1912/>
2. Gross, Stephen 2011, ‘History’s Lessons for the European Debt Crisis’, The Berkeley Blog, 26 July, viewed 14 Aug 2011, <http://blogs.berkeley.edu/2011/07/26/historys-lessons-for-the-european-debt-crisis/>
3. Mittelstaedt, Martin 2011, ‘The Day the Greenback Divorced Gold’, The Globe and Mail, 12 Aug, viewed 14 Aug 2011, <http://www.theglobeandmail.com/report-on-business/the-day-the-greenback-divorced-gold/article2128489/>
4. Mushin, Jerry 2010, ‘The Euro and Its Antecedents’, Economic History Association, 4 Feb, viewed 14 Aug 2011, <http://eh.net/encyclopedia/article/mushin.euro>
5. Coggan, Philip 2011, ‘Forty Years On: An Anniversary for the Currency Markets’, The Economist, 13 Aug, viewed 14 Aug 2011, <http://www.economist.com/node/21525933>
6. Schifferes, Steve 2008, ‘How Bretton Woods Reshaped the World’, BBC News, 14 Nov, viewed 14 Aug 2011, <http://news.bbc.co.uk/2/hi/7725157.stm>
7. Special Drawing Rights (SDRs) 2011, factsheet, The International Monetary Fund, viewed 14 Aug 2011, <http://www.imf.org/external/np/exr/facts/sdr.htm>
8. Boaz, David 2009, ‘Time to Think About the Gold Standard’, Cato Institute, 12 Mar, viewed 14 Aug 2011, <http://www.cato-at-liberty.org/time-to-think-about-the-gold-standard/>