ECO342H1 Lecture Notes - Lecture 2: Bretton Woods System, Reserve Currency, Reserve Requirement
Document Summary
We are dealing with extraordinary period, golden age. One interpretation is bretton woods was reason for golden age and end of golden age was due to end of bretton woods. Ratified december 18 1946 by leaders of 32 countries. Establishes system of par values for international exchange rates based on gold and usd, and. Intends to replicate fixed exchange rates of gold standard era without constrictions imposed by shortage of gold as basis of international money. Belief of time was a link between paper currencies and gold guaranteed price stability in long run and facilitated international trade. Only started operating as intended from december 27 1958. Western european countries make currencies fully convertible into gold. Officially ends february 15 1971 when nixon ends convertibility of usd into gold. Defined national currency value relative to specific weight and fineness of gold. Circulation of paper notes and coins (non-good legal tender) restricted by legal minimum reserve ratio.
