Group 1: The History of International Monetary Systems
Summary
TLDRThis video explores the evolution of international monetary systems, from the bimetallism standard of the 19th century to the Bretton Woods system and beyond. It discusses how the gold standard influenced global economies and the shift to the US dollar as the international standard after World War I. The script also covers the challenges faced by the gold standard, the impact of World War II on the US dollar, and the emergence of the European monetary system. It concludes by reflecting on the current state of currency comparison and the improbability of a return to bimetallism.
Takeaways
- 💰 The bimetallism standard (1803-1873) defined national monetary units using fixed quantities of gold and silver.
- 🇫🇷 France, along with Belgium, Italy, and Switzerland, formed the Latin Monetary Union in 1865 to standardize the bimetallism system.
- ⚖️ Bimetallism provided price stability and greater monetary reserves by allowing the use of both gold and silver, but it was costly to maintain.
- ⚒️ Gold became the next standard after bimetallism ended, with the UK adopting the gold standard in 1821, attracting other countries to follow.
- 💸 The gold standard limited government control over paper currency, ensuring fixed exchange rates but lacking flexibility in the money supply.
- 📉 The gold standard collapsed after World War I due to economic instability, leading to the rise of the US dollar as the dominant international currency.
- 🌍 The Bretton Woods system (1944) established rules for global financial relations, tying currencies to the US dollar, which was backed by gold.
- 💡 In 1971, the US terminated the dollar’s convertibility to gold, ending the Bretton Woods system and introducing fiat currencies.
- 📉 The Smithsonian Agreement failed to maintain stable exchange rates, leading to the free-floating of major currencies in the 1970s.
- 🔁 Economists in the 2000s described a new global system where high-saving Asian countries lend to high-spending Western countries, resembling a modern Bretton Woods system.
Q & A
What is the bimetallism standard, and when was it used?
-The bimetallism standard was a monetary system that defined a nation's currency in terms of fixed quantities of gold and silver. It was used between 1803 and 1873, beginning with France and later adopted by other European countries.
What was the purpose of the Latin Monetary Union formed in 1865?
-The Latin Monetary Union, formed by France, Belgium, Italy, and Switzerland in 1865, aimed to implement the bimetallism standard on a global scale to stabilize exchange rates and ensure the free use and coinage of gold and silver.
Why was the bimetallism standard eventually replaced by the gold standard?
-The bimetallism standard was replaced by the gold standard because managing the supply and coinage of both gold and silver became costly, and the fixed price ratio between the metals caused disruptions. The international monetary conference in 1867 decided to adopt the gold standard for better stability.
How did the gold standard function, and which country adopted it first?
-The gold standard tied a country’s currency value directly to a specific amount of gold. The UK was the first to adopt this standard in 1821, which later attracted other countries, particularly after the Franco-German war and new gold discoveries.
What were the key advantages and disadvantages of the gold standard?
-The advantages of the gold standard included fixed exchange rates, reduced inflation risk, and more certainty in international trade. However, its inflexibility in money supply and inability to protect countries from global inflation or economic crises led to its eventual decline.
What was the impact of the Great Depression on the gold standard?
-During the Great Depression (1929-1939), the global economy suffered from deflation, unemployment, and falling production. These economic pressures led to the abandonment of the gold standard, with countries like Britain and the US moving away from it in the early 1930s.
What role did the US dollar play after the gold standard collapsed?
-After the collapse of the gold standard, the US dollar became the dominant global currency. The US monetized its gold reserves, and the dollar emerged as the new international standard during the 1920s and post-World War I era.
What was the Bretton Woods system, and when was it established?
-The Bretton Woods system was a monetary framework established in 1944 to manage international financial relations. It tied currencies to the US dollar, which was backed by gold, and aimed to provide stability in exchange rates and international trade.
What led to the collapse of the Bretton Woods system?
-The Bretton Woods system collapsed in 1971 when the US terminated the convertibility of the dollar into gold, making the dollar a fiat currency. This was driven by global economic imbalances and inflationary pressures.
How did the European Monetary System (EMS) evolve, and what was its purpose?
-The European Monetary System, led by France and Germany in 1979, aimed to reduce exchange rate fluctuations and maintain currency stability in Europe. It established capital controls and allowed participating countries to follow Germany's low-inflation policies.
Outlines
🏦 International Monetary Systems: Bimetallism and Gold Standard
The script begins by discussing the historical context of international monetary systems, focusing on the bimetallism standard that was established from 1803 to 1873. This system allowed for a nation's monetary unit to be defined in terms of fixed quantities of gold and silver. The script highlights the problem of differing exchange rates between countries and the formation of the Latin Monetary Union in 1865 to address this issue. It then transitions to the gold standard, which emerged after the decline of bimetallism, with gold becoming the primary standard for international trade and currency valuation. The gold standard provided stability but was limited in its flexibility to supply money, which contributed to its eventual fall during World War I.
📉 The Great Depression and the Bretton Woods System
Paragraph 2 delves into the economic turmoil following World War I, leading to the Great Depression of the 1930s. It discusses the shift from the gold standard to the dollar standard, with the US dollar becoming the new international currency. The Bretton Woods system, established in 1944, aimed to regulate international monetary relations by pegging currencies to the US dollar, which was in turn convertible to gold. However, this system faced challenges and was terminated in 1971 when the US ended the convertibility of the dollar to gold. The paragraph also covers the floating exchange rates of the 1970s and the Plaza Accord of 1985, which aimed to stabilize the US dollar's value.
🎵 The Emergence of Modern Monetary Interdependencies
The final paragraph, indicated by the presence of a music symbol, likely introduces a new section or conclusion to the script. It briefly mentions the emergence of a new international monetary system characterized by interdependencies among states, particularly between high-saving Asian countries and high-spending Western countries. This system involves currency pegging and government interventions to manage currency values, which has been a topic of economic discussion and debate. The paragraph concludes by suggesting that a return to bimetallism is unlikely in the modern era.
Mindmap
Keywords
💡Bimetallism Standard
💡Latent Monetary Union
💡Gold Standard
💡Franco-German War
💡Anchored Dollar Standard
💡Bretton Woods System
💡Fiat Currency
💡European Monetary System (EMS)
💡Plaza Accord
💡Louvre Accord
💡Structural Imbalances
Highlights
The bimetallic standard was the first internationally recognized monetary system from 1803 to 1873.
Nations independently set exchange rates within gold and silver, leading to inconsistent international rates.
The Latin Monetary Union in 1865 aimed to implement a worldwide bimetallic system with about 20 nations joining.
Bimetallism provided free market access for gold and silver, offering greater monetary reserves and price stability.
The high cost of mining, handling, and coinage led to the decline of bimetallic standards.
The international monetary conference in 1867 decided to terminate the bimetallic standard in favor of the gold standard.
The gold standard, with gold as the primary currency, emerged after the bimetallic regime's breakup.
The UK's early adoption of the gold standard in 1821 contributed to its economic and political dominance.
Gold discoveries in Western North America made gold more plentiful, influencing many countries to adopt the gold standard.
The gold standard era fixed exchange rates and limited governments' power to issue paper currency, reducing price inflation.
The gold standard's inflexibility in money supply and inability to isolate economies from global economic issues led to its fall.
The Bretton Woods system, established in 1944, set rules for monetary relations among the US, Canada, Western European countries, Australia, and Japan.
The Bretton Woods system required countries to tie their currencies to gold and maintain stable exchange rates.
The US terminated the convertibility of the dollar to gold in 1971, ending the Bretton Woods system and transitioning to a fiat currency.
The Plaza Accord in 1985 was an agreement to depreciate the US dollar to address its overvaluation.
The European Monetary System, established in 1979, aimed to resolve exchange rate instability with a focus on the German mark.
The EMS provided credits to members facing balance of payment issues and promoted a degree of monetary policy autonomy.
Economists have described the emergence of a new international system involving interdependency among states with high savings and spending.
The current international monetary system is characterized by Asian currencies being pegged to the dollar and government interventions to prevent appreciation.
The new Bretton Woods system, called for addressing structural imbalances such as the chronic US current account deficit.
Transcripts
when the removes currencies are compared
to the others how powerful are our
currencies the school actually matter
today we will learn all of those things
by observing the history of
international monetary systems the first
internationally recognized monetary
system was established during 1803 until
1873 namely the bimetallism standard the
standard defined a nation's monetary
unit in terms of fixed quantities of
gold and silver it was used when French
issued a lot of locally used by
mentalism for its economics in 1803 and
then followed by other European
countries in later years however each
nation called independently set its own
rate of exchange within the two metals
this fact left a classical problem in
international use that the resulting
rates often differ wildly from country
to country in order to overcome this
problem French along side with Belgium
Italy and Switzerland formed the latent
monetary union in 1865 as an attempt to
implement the system in a worldwide
scale in the following years about 20
nations has agreed to join the Union
bimetallism provided a free and
unlimited market for gold and super
imposed no restrictions on the use and
coinage of either metal and made all our
money in circulation redeemable in
either gold or silver the system was
preferable to modern mentalism since the
combination of two metals provides
greater monetary reserves and price
stability it is also easier to determine
and establish the exchange rates among
countries using gold silver or
bimetallic standards nevertheless due
process in mining handling and coinage
was costly the amount of demand and
supply of the metals was changed over
time but the ratio of the price between
both metals still the same the condition
could disrupt the double standard
finally the international monetary
conference held in Paris in 1867 decided
to terminate the use of the standard and
replace it with a gold standard the
system gradually came to
and with the franco-german war in 1870
next let's talk about the gold standard
after the breakup of the B mettlesome
regime gold came up as the next standard
of the monetary system gold coins
circulated as domestic currency
alongside coins of other metals and
notes with the composition ferrying by
country in 1821 the UK used this
standard early and enriched economic and
political dominance in the 1870s this
dominance attracted other countries to
enter London's financial markets fast
forward to the end of the franco-german
war Germany extracted reparations from
France to facilitate a move to the gold
standard meanwhile recent gold
discoveries in Western North America had
made gold more plentiful the impact of
these events encourages many countries
to turn into the gold standard during
the gold standard era dermstick
currencies were fairly comfortable in
the gold at a fixed price with no
restrictions the exchange rates between
participating currencies were also fixed
since each currency has a fixed ratio in
terms of gold were over the standard
limited the power of governments to
issue paper currency which could lead to
price inflation it also created
certainty in international trade by
providing a fixed pattern of accents
rates the gold standard may not provide
enough flexibility in the supply of
money due to the in relativity between
the supply of nearly mine gold and the
growing needs of the world economy it
also prohibited any country to isolate
its economy from the inflation or
depression this disadvantages cost the
fall of the system along with the
beginning of World War one in 1914 the
anchored dollar standard during the
World War God flooded the u.s. economics
as a result of ammunition trading with
Europe after the war in 1918 the lack of
gold supplies brought European tough
financial crisis meanwhile the u.s.
monetizes gold which doubled the prices
the US dollar became the only major
currency and the globe
economy turned unstable within the gold
standard which led to the US dollar
becoming the new international standard
this implies that the US economy
expanded rapidly during the 1920s and
even doubled between 1920 and 1929 in
1924 Germany went back to gold in its
stabilization plan to stop its
hyperinflation followed by Britain in
1925 France in 1926 and several other
countries this condition resulted an
excess demand for gold causing deflation
in major global economics meanwhile in
America the stock market reached its
peak in 1929 however production decline
and unemployment at rising wages were
low food prices fell and banks had an
excess of large loans
it cannot be liquidated investors
started to sell their offer priced
stocks which led to the stock market
crash the world faced the Great
Depression during 1929 until 1939
Britain adopted gold in 1931 followed by
the America in 1933 after the following
the dollar surveyed reported monetary
agreement was established in 1936
renting a new kind of the last tender
but the dollar still new currencies and
current gold and all other countries in
the system kept their respective
currencies back to dollar only and
system plotted the remaining 36 the 19th
the Bretton Woods system of monetary
management established the rules for
commercial and financial relations among
the US Canada Western European countries
Australia in Japan after the 1944
Bretton Woods Agreement the Bretton
Woods system was the worst example of a
fully negotiated monetary order intended
to govern monetary relations among
independent states the chief features of
the Bretton Woods system were an
obligation for each country to adopt a
monetary policy that mean then it's
external exchange rates within 1% by
tying its currency to gold and the
ability of the IMF to bridge the broader
in balance of payments also there was a
need to address the lack of cooperation
among other countries and the preferred
calm the devaluation of the currencies
as well on 15 August 1971 the United
States and literally terminated
convertibility of the US dollar to gold
effectively bringing a Brotherhood
system to an end and entering the dollar
a fiat currency at the same time many
fixed currencies such as a pound
sterling also become free-floating
after the collapse of the Smithsonian
agreement the major currencies of North
America Europe and Japan floated during
the nineteen seventies the dollar
depreciated from invasion and then
commenced as dramatic ascend following
the 1979 284 shock when US interest
rates were hike to unprecedented levels
by 85 the dollar strain was harming us
competitiveness prompting the US Japan
Germany France to send a procedure
called under which they join intervene
to lower together and the rate of
vention was so effective that they had
to set another agreement in 1987 the
lower court to stop the further fall of
the dollar prior to these meetings
free-floating actions read what I
consider the best but thereafter the
major countries began to cooperate more
minute exchange rate the European
monetary system or AMS was guided by
France and Germany in 1979 to resolve
these deficiencies participating
currencies were still hot within their
bladder margins of 2.5 percent but are
now humbly the capital controls to allow
a degree of Madrid policy autonomy more
importantly a new entity the European
monetary fund was established to provide
credits known as Equis the members
experiencing balance of payment problems
in practice the EMS was a douche mark
Center system with German mother policy
serving as the nominal income
other countries reduce their inflation
for Germany's which was the lowest in
Europe and this time now the
participants had to withdraw and further
the degree of access rate stability was
achieved and particularly after 1985
from 2004 economists such as Michael be
duly Peter M Garber and David Falk and
slando
began writing papers describing the
emergence of a new international system
involving an interdependency within
states with generally high savings in
Asia landing and exporting to western
states with generally high spending
similar to the origin of Bretton Woods
this included Asian currencies being
pack to the dollar tourist and by the
unilateral intervention of Asian
governments in a currency market to stop
their currencies appreciating the
developing world as a world stock
running current account deficits in 1999
widely seen as a response to
unsympathetic treatment following the
1997 Asian financial crisis from 2004
this supposed new Bretton Woods was
called for the elimination of the
structural imbalances that underlie it
mainly the chronic u.s. current account
deficit in conclusion while most of us
compare our currencies to desert there
is no way we're going back to
bimetallism unless you want to go back
to the 18th century
[Music]
関連動画をさらに表示
The History of Paper Money - The Gold Standard - Extra History - Part 6
How America Made The Dollar A Global Benchmark | Epic Economics
Why Can’t Governments Print Unlimited Money?
BlackRock Will Collapse The Entire System - Whitney Webb 2024 Prediction
Bretton Woods system
International system of states transformation, Peter W. Schulze, Co-Founder, DOC Research Institute
5.0 / 5 (0 votes)