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The less faith foreigners had in the united states

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The less faith foreigners had in the United States, the more they wanted to get rid of the dollarsand get gold in return.Too bad, United States did not have enough gold to redeem all the dollars held by foreigners.Thus, Bretton Woods era ends in August 15, 1971
INTERNATIONAL MONETARY SYSTEM SINCE 1971In 1971, the US and other countries started to allow currencies to float just torestructure and strengthen the international monetary system through TheSmithsonian Agreement.Under aflexible(orfloating)exchange rate system,supply and demandfor acurrency determine its price in the world market.If the demand for the currency is high, the value will increase.
INTERNATIONAL MONETARY SYSTEM SINCE 1971Since 1973, exchange rates among many currencies have been establishedprimarily by the interaction of supply and demand.The new flexible exchange rate system was legitimized by an internationalconference held in Jamaica in January 1976.According to theJamaica Agreement, each country was free to adopt whateverexchange rate system that best met its own requirements.The United States adopted a floating exchange rate. Other countries adopted afixed exchange rate by pegging their currencies to the dollar or some othercurrency.
EUROPEAN MONETARY SYSTEM (EMS) BY EUROPEAN UNIONThe strategy adopted by European Union (EU) members is based in the belief thatflexible exchange rateswouldhinder their ability to create an integrated Europeaneconomy.In 1979 EU members created theEuropean Monetary System(EMS) to managecurrency relationships among themselves.Most EMS members chose to participate in the EU’sexchange rate mechanism(ERM).ERM participantspledged to maintain fixed exchange ratesamong their currencieswithin a narrow range of±2.25 percent of par value (agains 1 ounce of gold)andafloating rate against the U.S. dollar and other currencies.The exchange rate mechanism facilitated the creation of the EU’s single currency,the euro in 1999.
INTERNATIONAL DEBT CRISISThe Organization of Petroleum Exporting Countries (OPEC) succeeded inquadrupling world oil prices from $3 a barrel in October 1973 to $12 a barrelby March 1974.The currencies of oil-exporting countries strengthened, and the oil-importersweakenedMany of the oil-exporting countries went on spending sprees, using their newwealth to improve their infrastructures or to invest in new facilities (such aspetroleum refineries) to produce wealth for future generations.The unspentpetro-dollarswere deposited in banks in international moneycenters such as London and New York City.
…CONTINUEThe international banks were too aggressive in recycling thesedollars. Many countries borrowed more than they could repay.Interest rates on these loans rose, further burdening the heavilyindebted nations.

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madam

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