oussama94
05-28-2017, 19:36
The forex markets re****ed in March 1973, and this time they were
not bound by a Smithsonian Agreement: the value of the U.S. dollar was
to be determined entirely by the market, as its value was not fixed to any
commodity, nor was its exchange rate fluctuation confined to certain parameters.
While this did provide the U.S. dollar, and other currencies by
default, the agility required to adapt to a new and rapidly evolving international
trading environment, it also set the stage for unprecedented inflation.
The end of Bretton Woods and the Smithsonian Agreement, as well as con-
flicts in the Middle East resulting in substantially higher oil prices, helped
to create stagflation—the synthesis of unemployment and inflation—in the
U.S. economy. It would not be until later in the decade, when Federal Reserve
Chairman Paul Volcker initiated new economic policies and President
Ronald Reagan introduced a new fiscal agenda, that the U.S. dollar
would return to normal valuations. And by then, the foreign exchange
markets had thoroughly developed, and were now capable of serving a multitude
of purposes: in addition to employing a laissez-faire style of regulation
for international trade, they also were beginning to attract speculators
seeking to participate in a market with unrivaled liquidity and continued
growth. Ultimately, the death of Bretton Woods in 1971 marked the beginning
of a new economic era, one that liberated international trading while
also proliferating speculative opportunities
not bound by a Smithsonian Agreement: the value of the U.S. dollar was
to be determined entirely by the market, as its value was not fixed to any
commodity, nor was its exchange rate fluctuation confined to certain parameters.
While this did provide the U.S. dollar, and other currencies by
default, the agility required to adapt to a new and rapidly evolving international
trading environment, it also set the stage for unprecedented inflation.
The end of Bretton Woods and the Smithsonian Agreement, as well as con-
flicts in the Middle East resulting in substantially higher oil prices, helped
to create stagflation—the synthesis of unemployment and inflation—in the
U.S. economy. It would not be until later in the decade, when Federal Reserve
Chairman Paul Volcker initiated new economic policies and President
Ronald Reagan introduced a new fiscal agenda, that the U.S. dollar
would return to normal valuations. And by then, the foreign exchange
markets had thoroughly developed, and were now capable of serving a multitude
of purposes: in addition to employing a laissez-faire style of regulation
for international trade, they also were beginning to attract speculators
seeking to participate in a market with unrivaled liquidity and continued
growth. Ultimately, the death of Bretton Woods in 1971 marked the beginning
of a new economic era, one that liberated international trading while
also proliferating speculative opportunities