Thesis statment: When the interwar years fluctuating exchange rates brought the world to its knees, how did fixed exchange rates post world war 2 re-established and shaped our world even after its collapse in 1971
Assignment Task
Thesis statment: When the interwar years fluctuating exchange rates brought the world to its knees, how did fixed exchange rates post world war 2 re-established and shaped our world even after its collapse in 1971.
Introduction
- The Bretton Woods agreement creation in 1944 conference of all of the World War II Allied nations
- The agreement that created the World Bank and the International Monetary Fund (IMF) that we know today
- A brief synopsis of the economic theories operating post the agreement
Prior and during Bretton Woods era
- Most countries followed the gold standard That meant each country guaranteed that it would redeem its currency for its value in gold
- “Beggar thy neighbor” policy which entailed the 1931 financial crisis
- United States held three-fourths of the world's supply of gold.
Bretton woods’ monetary policies and its influence
- Austrian school of economics policies versus keynesian policies
- How and why most countries were pegged to one “reserve currency”
- The par value peg to maintain 1% parity in the foreign exchange market
- The floating rate system of the 1960s
Nixon shock
- The London gold pool collapse
- President de Gaulle speech France and world’s fears of encroachments on their autonomy
- Nixon de-pegged the value of the dollar from gold in 1971
Nixon shock’s monetary effects on our world today
- Expansion of monetary policy leading to gross malinvestment
- Financial asset inflation through the de-anchoring of the fixed exchange
- Rise of “zombie companies and the zombie economy” via low rates
Conclusion
- 2008 financial crisis cumulating the beginning of the end post Bretton woods system era
- 2020 Covid-19 crisis drawing the end to the policies post Bretton woods system era
- The realistic expectation moving forward