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 nationsThe agreement that created the World Bank and the International Monetary Fund (IMF) that we know todayA 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 crisisUnited 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 policiesHow and why most countries were pegged to one “reserve currency”The par value peg to maintain 1% parity in the foreign exchange marketThe floating rate system of the 1960s
Nixon shock
The London gold pool collapsePresident de Gaulle speech France and world’s fears of encroachments on their autonomyNixon 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 malinvestmentFinancial asset inflation through the de-anchoring of the fixed exchangeRise of “zombie companies and the zombie economy” via low rates
Conclusion
2008 financial crisis cumulating the beginning of the end post Bretton woods system era2020 Covid-19 crisis drawing the end to the policies post Bretton woods system eraThe realistic expectation moving forward
