The Gold Exchange and the Bretton Woods Agreement
In 1967, a bank of Chicago refused a professor of university by the name of Milton Friedman a loan in pounds sterling because it had intended to employ the funds to short-circuit the British currency. Friedman, which had perceived the sterling to be been too expensive against the dollar, wanted to sell the currency, then later again buys it with refund the bank after the currency decreased, of this fact empochant a fast benefit. The refusal of the bank to grant the loan was due to the agreement of Bretton Woods, established twenty years earlier, than the fixed national currencies against the dollar, and placed the dollar ata rate of $35 per ounce of gold.
The agreement of Bretton Woods, installation in 1944, aimed installing international monetary stability by preventing the money from running away itself through nations, and at limiting the speculation in the currencies of the world. Before the agreement, the gold exchange standard--prevalence between 1876 and First World War--dominated the international economic system. Under the exchange but, the currencies gained a new phase of stability while they were supported by the ransom price. It removed the historical practice employed by kings and governors of money lowering arbitrarily and inflation of release.
But the gold exchange standard did not miss defects. While an economy reinforced, it would strongly import from abroad until it functioned in bottom of its gold reserves required to support its money; consequently, the money supply would narrow, pink of interest rates and economic activity slowed down until the degree of the recession. Finally, the prices of the goods had struck the bottom, pretence attracting with other nations, which would precipitate in the festivals of purchase which injected the economy with gold until it increased its money supply, and to involve a reduction with interest rate and recreate the richness in the economy. Such models of pole-bust reigned in all the gold standard until the demonstration of First World War stopped the trade flows and freedom of movement of gold.
After the wars, the agreement of Bretton Woods was founded, where countries of participation accept to test and maintain the value of their currency with a narrow margin against the dollar and a corresponding gold rate like necessary. Countries were prohibited to devaluate their currencies with their commercial advantage and were only allowed to make thus for devaluations of less than 10%. In the Fifties, volume never expansion of international business led to the massive movements of the capital produced by the construction of post-war period. That destabilized rates of foreign currencies like installation with Bretton Woods.
The agreement was finally abandoned in 1971, and the US dollar would not be convertible any more out of gold. From here 1973, the currencies of the important industrialized nations floated more freely, because they were ordered mainly by the forces of supply and. Prices were floated daily, with the volatility of volumes, speed and price increasing all throughout the Seventies, causing new instruments, deregulation of the market and release of exchanges.
In the Eighties, the movements of the capital of frontier capital accelerated with the arrival of the computers and technology, prolonging the continuum of the market by Asian, European and American time zones. Transactions in foreign currencies assembled out of arrow of approximately $70 billion per day in the Eighties, with more than $1.5 trillions one day later two decades.
In 1967, a bank of Chicago refused a professor of university by the name of Milton Friedman a loan in pounds sterling because it had intended to employ the funds to short-circuit the British currency. Friedman, which had perceived the sterling to be been too expensive against the dollar, wanted to sell the currency, then later again buys it with refund the bank after the currency decreased, of this fact empochant a fast benefit. The refusal of the bank to grant the loan was due to the agreement of Bretton Woods, established twenty years earlier, than the fixed national currencies against the dollar, and placed the dollar ata rate of $35 per ounce of gold.
The agreement of Bretton Woods, installation in 1944, aimed installing international monetary stability by preventing the money from running away itself through nations, and at limiting the speculation in the currencies of the world. Before the agreement, the gold exchange standard--prevalence between 1876 and First World War--dominated the international economic system. Under the exchange but, the currencies gained a new phase of stability while they were supported by the ransom price. It removed the historical practice employed by kings and governors of money lowering arbitrarily and inflation of release.
But the gold exchange standard did not miss defects. While an economy reinforced, it would strongly import from abroad until it functioned in bottom of its gold reserves required to support its money; consequently, the money supply would narrow, pink of interest rates and economic activity slowed down until the degree of the recession. Finally, the prices of the goods had struck the bottom, pretence attracting with other nations, which would precipitate in the festivals of purchase which injected the economy with gold until it increased its money supply, and to involve a reduction with interest rate and recreate the richness in the economy. Such models of pole-bust reigned in all the gold standard until the demonstration of First World War stopped the trade flows and freedom of movement of gold.
After the wars, the agreement of Bretton Woods was founded, where countries of participation accept to test and maintain the value of their currency with a narrow margin against the dollar and a corresponding gold rate like necessary. Countries were prohibited to devaluate their currencies with their commercial advantage and were only allowed to make thus for devaluations of less than 10%. In the Fifties, volume never expansion of international business led to the massive movements of the capital produced by the construction of post-war period. That destabilized rates of foreign currencies like installation with Bretton Woods.
The agreement was finally abandoned in 1971, and the US dollar would not be convertible any more out of gold. From here 1973, the currencies of the important industrialized nations floated more freely, because they were ordered mainly by the forces of supply and. Prices were floated daily, with the volatility of volumes, speed and price increasing all throughout the Seventies, causing new instruments, deregulation of the market and release of exchanges.
In the Eighties, the movements of the capital of frontier capital accelerated with the arrival of the computers and technology, prolonging the continuum of the market by Asian, European and American time zones. Transactions in foreign currencies assembled out of arrow of approximately $70 billion per day in the Eighties, with more than $1.5 trillions one day later two decades.
No comments:
Post a Comment