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History of Gold - Part 3

The third part of the history of gold explores the Bretton Wood System (1944 - 1971) which rejuvenated the gold standard and led to the rise of the US dollar to a global reserve currency. The collapse of this system, Bretton Woods, was already certain from the beginning on, due to its flawed design. However, Bretton Woods encouraged world trade and bound countries closer together. From this perspective, this agreement was a success.

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Florian Fisher
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106 views

History of Gold - Part 3

The third part of the history of gold explores the Bretton Wood System (1944 - 1971) which rejuvenated the gold standard and led to the rise of the US dollar to a global reserve currency. The collapse of this system, Bretton Woods, was already certain from the beginning on, due to its flawed design. However, Bretton Woods encouraged world trade and bound countries closer together. From this perspective, this agreement was a success.

Uploaded by

Florian Fisher
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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History of Gold

3. Part
Bretton Woods System (1944 –
1971)
1. INTRODUCTION OF BRETTON WOODS

1. Bretton Woods established the rules for


global commercial and financial relations in
1944
2. The US dollar as reserve currency was at its
core with a fixed exchange rate of US$ 35
for one ounce of gold
3. As foreign currencies were pegged to the
dollar, the gold rate could be set for a long
time in advance.
2. INTRODUCTION OF BRETTON WOODS

1. The aim of Bretton Woods was a barrier-free


word trade based on fixed exchange rates
2. Two auxiliary institutions were to oversee
the system
3. These were the International Monetary Fund
and the International Bank for
Reconstruction
3. TRIFFIN DILEMMA

1. In 1959, the Belgic-American economist


Robert Triffin pointed out a flaw in the
Bretton Woods System.
2. Foreign governments held more dollar
reserves as the US central bank had gold
reserves.
3. Thus, to maintain liquidity for international
trade, more US dollars had to be printed
4. LONDON GOLD POOL

1. In 1960 US foreign liabilities exceeded their


national gold reserves
2. This proved a danger to Bretton Woods
3. To maintain the system, the USA and seven
European nations agreed to keep the gold
rate at a certain rate by market interventions
5. CRISIS AND COLLAPSE

1. In 1967 the French president Charles de


Gaulle declared that the Vietnam War made
it impossible for France to continue with the
payments for the London Gold Pool
2. In the same year, the British government
decided to devalue the British Pound
3. This resulted in a rush demand for gold.
6. CRISIS AND COLLAPSE

1. In 1969 several participants of Bretton


Woods tried to exchange their dollar reserves
into gold
2. The United States was not able to fulfill their
contractual obligations.
7. CRISIS AND COLLAPSE

1. Foreign US dollar reserves were in 1971 so


large, that the US could not even have
converted the dollar reserves for gold of only
one participating country.
2. In 1971 Nixon cancelled unilaterally the
direct convertibility of the dollar to gold
3. This led to a collapse of Bretton Woods and
the fixed gold price of US$ 35 per ounce
ceased to exist.
INTERESTED IN MORE?

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Trading and Investment Advice:

www.goldratefortoday.org

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