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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

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

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