In the 1970s, a decade of relative economic, military, and political weakness for the United States, American monetary authorities built up considerable foreign currency reserves. The U.S. hastily withdrew from Vietnam. The country experienced an oil and gasoline crisis because of tensions in the Middle East. U.S. national prestige plummeted during the Iranian hostage crisis. If that were not enough, the dollar sustained weakness in global markets.
During this decade of national decline, the U.S. borrowed hard currency from West Germany. In addition, the U.S. Treasury issued foreign currency-denominated securities, so-called Carter bonds, and the U.S. drew down its currency reserve positions in the International Monetary Fund.
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