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ECON Video #11

ECON Video #11 - dollars into gold The reason for these...

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Michael Blasius 12/06/07 Video #11 Exchange Rates: What in the World is a Dollar Worth? Before 1933, most of the world used gold as the standard currency by which to measure currency against. When England moved away from the gold standard, they failed miserably and many lost money. When FDR became president, he abandoned the gold standard in order to create a strong economy in the US , ignoring foreign trade. This worked tremendously and the dollar has ever since been the leading currency in the world market . In 1944, the battles of World War II were still going on. There were still questions as to what would become of the nations affected by the war. The countries needed resources in order to reconstruct their nations and the United States was the one to fund these reconstructions . Soon, America had made the European nations independent and America began importing more than it exported . When Nixon became president, he suspended the conversion of American
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Unformatted text preview: dollars into gold. The reason for these events was the fact that the dollar had been operating on a fixed exchange rate and when there became a surplus of US dollars, the dollar became devalued even though its exchange rate was the same. In 2002, twelve European nations gave up their own currency in order to establish a common currency which is called the Euro . Because these countries all use the same currency, they must all have the same interest rates. This eliminates exchange market fluctuations. Also, it creates difficulties when one nation is having economic problems because they cannot raise interest rates to induce foreign investments . A lack in confidence in the Euro led exchange rates to favor the dollar over the Euro until recent years. Overall, the change to the euro has been a success and went very smoothly....
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