International Monetary System

Most, if not all countries, now use fiat currency. Money is not backed by any commodity. When a monetary system is based on commodity money, the money in circulation can be backed up by the commodity.

To discuss its historic background I will concentrate on the Bretton Woods System. Bretton Woods System is an international currency system started form 1944 July at the end of the Second World War. This system require each country to obey the rule that they tied its currency to gold in order to keep the exchange rate stable and prevent the currencies from devaluation. The establishment of this system ensure the resume and development of capitalist world economy especially America. Although this system ultimately disintegrated in 1973, it still make significant contributions to America’s irreplaceable role today.

The Euro and its Impact on the U.S. Economy The euro is the official currency of the following 12 European nations: Belgium, Germany, Greece, Spain, France, Luxembourg, Ireland, Italy, The Netherlands, Austria, Portugal, and Finland. Although it has been the official currency since January 1,1999 it became physical tender which can be used by all participating countries on January 1,2002. The introduction of the euro into the world was truly a historic event; it represented a unity never before seen in the history of Europe, a common currency. After years of negotiations and much skepticism from around the globe, the implementation of the euro is no longer an abstract ideal, but a change that nations, corporations, and investors must

After World War II, the Bretton Woods Agreement established the gold standard and two support institutions called the International Monetary Fund (IMF) and the World Bank. This would lead to a shift, away from the gold standard, to more relaxed systems. The idea of currency purely backed by gold was slowly being shifted to a trust based currency. These institutions purpose was to regulate the economies by injecting or taking money in a process called sterilization. Sterilization is to protect certain countries from a going bankrupt. If a country goes bankrupt, it chain a chain reaction of bankruptcies. So, in order to maintain balance, currencies need to be stable enough, so that it can be in debt without having to declare bankruptcy. The idea is

Ever since the Bretton Woods agreement in 1944, the U.S dollar became the world’s currency. Bretton Woods agreement was basically an agreement on which every country currency would be back up by the dollar, due to the fact that after WWII United States was the only one with the biggest gold reserve in the world. Although it was proposed as a good idea it had its flaws for one even though it help the U.S and other countries there was simply not enough gold to continue backing up the dollar value. Which lead to President Richard Nixon to abolish the gold standard economy. His abolish of a gold standard economy lead to a new proposal on which the dollar would be back by.

At the end of World War Two, the Bretton Woods system was established for world currencies. This system involved countries fixing their currencies to the US Dollar, which in turn was tied to the value of gold at a fixed exchange rate of $35 per ounce. As this was a fixed exchange rate system it effectively forced countries to pursue a certain monetary policy, in order to keep their currency pegged to the Dollar and in turn the value of gold.

Monetary development is something that everybody around the globe battles with ordinary. A great many people are unmindful in respect to what 's genuinely happens in the economy as to expansion, unemployment, and loan costs; these things are all directed by a national bank called the Federal Reserve System. The arrangement that I will talk about in this paper chooses if unemployment, hobby, and swelling declines or increment is fiscal strategy. Money related arrangement chooses what value a man pays for a thing at the store, the amount of premium a man will get charged on an advance for an auto. These are all things that no one genuinely asks themselves, a great many people simply search around and pick the best value or the best financing

Attaching money to good and promising convertibility is recognized as the gold standard. By 1880, furthermost of the world’s main trading nations, together with Great Britain, Germany, Japan, and the US, had accepted the gold standard. Specified a cooperative gold standard, the worth of any money in elements of any additional coinage was informal to

The money game in the U.S. has many players with each one making their contribution to the very best economic machine in the world. Since the Americans installed their form of currency into the world, things have never been the same.

Behind the global power of the U.S. dollar, hides the most significant form of currency you 've probably never heard of, the Petrodollar. The word “Petrodollar” was coined by the Egyptian economist Ibrahim Oweiss, as a way to describe how oil producing and exporting countries were accounting for oil units outside of the regular money supply. While the Petrodollar may not be a commonly used term, I would agree with Economist Jerry Robinson when describing it as, "the most brilliant [series of] political-economic moves in recent history… [being] the fabric that holds our [U.S.] economy together”. As the major cornerstone for the U.S.’S economic prosperity and international hegemony, following the change of the Bretton Woods System to the Petrodollar system in 1971; I 've found the largest independent factor to influence American international interests has been the implementation and preservation of the Petrodollar.

Now, the increase of dollar against euro has been considerable. In this moment, the change of this currency is at 1,06 dollars. This is great for the United States. So, we see that the dollar has taken force against other currencies.

participants in this conference created three organizations to help regulate the international economy. The first is the International Monetary Fund (IMF) which was established with the idea of regulating monetary policy. One of the benchmarks of the IMF is the stabilization of exchange rates and the loaning of money to help stabilize countries with balance of payments deficits. The second organization established was the General Agreement on Tariffs and Trade (GATT) whose main focus was on a liberal trading order.

Robert Mundell’s Trilemma, also known as the Impossible Trinity, states that a nation cannot realize monetary policy autonomy, free capital movements, and exchange rate stability at the same time. While either of the two goals can combine and actualize in any given period, as a simultaneous and three-fold effort, each objective cannot coexist. Together they are simply incompatible. Thus, and holding true to the tradeoff-nature of economics, Mundell’s undisputed theory illustrates that in order for a nation to attain its preferred monetary goals it must give up one desired option. Nevertheless, it is no easy decision. Before any resolution is made, nations must invest substantial time and energy into understanding the consequences at stake because the policies that they do deicide to implement are not only felt at a national or international level but personally amongst those that they govern.

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.

1.The international financial institutions (IFIs) are central pillars and the architects of the global economy. The world bank and IMF were founded and funded by the United states after the second world war to build shattered world economy after the war and great depression of the 1930s (socialist alternative,). The creation of the IFIs was to bring about a global economy after the “isolation economy” which some argue brought about the Second World War. The IFIs were to help the economy of the less developing countries (LDCs) to bring about growth and development, a phenomenon known as globalization.