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Nations currency after World War I

3-4 lines on role of US

Shortly after World War I, the nations of the world returned to tracking the value of their currencies to the price of gold. This system lasted until the Great Depression era when nations suspended gold convertibility.
what role did the United States play in all of this?

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Toward the end of World War II, with the world's economic system of trade in ruin, over 40 nations met in the United States at a resort in New Hampshire to create rules and organizations to govern the post-war international monetary system.
What was the name of the "system" that came out of this series of meetings, what were the two multinational institutions that were established, and explain the mission of one of these two organizations.

Fill in the blanks(u can use more than one word for this)

5. Speculative pressures on the US dollar occurred in 1971 when President Nixon closed the so-called gold window. There were two basic reasons for this speculation. They were______________________________ and _____________________

10. In order to minimize risk, letters of credit should always be ________________ and as such they may be done on either a __________ or ____________ basis.

True/False

1. In a country's balance of payments accounts, whenever a transaction resulting in a payment from another country is entered it is done so as a debit and given a negative (-) sign.

2. A firm considering FDI usually must negotiate the terms of the investment with the host government.

10. Because there is a lack of governmental regulations, the eurocurrency market is unattractive to depositors and borrowers.

11. Vertical differentiation refers to how the firm is divided into subunits.

12. The most favorable aspect of the liquidity in one's own domestic market is that the cost of capital tends to be lower than it is in the international markets.

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3-4 lines on role of US

Shortly after World War I, the nations of the world returned to tracking the value of their currencies to the price of gold. This system lasted until the Great Depression era when nations suspended gold convertibility.
what role did the United States play in all of this?

Gold was $20.67 in 1933, when gold was money and a $20 gold coin actually contained 0.9675 ounces of gold. Gold should have been priced at $35 an ounce in 1947.
But President Roosevelt had set the gold price at $35 an ounce back in 1934, thereby overvaluing gold and undervaluing the dollar. As a result, the US Treasury's gold reserves increased by 117% from 1934 to 1940, as foreigners sold massive quantities of the metal to the United States (see last week's column).
From 1940 to 1957 the US Treasury's gold reserves remained relatively constant but by 1958 they started falling. Within three years, by 1960, Treasury gold reserves had declined as much as twenty two percent. Just as the increase in gold reserves from 1935 to 1940 indicated that gold was overvalued and the dollar was undervalued, the decline in reserves after 1957 indicated that the dollar was now overvalued, and gold was undervalued.
It was becoming more and more difficult for the European and American Reserve Banks to maintain the gold price at $35 an ounce. In 1961 the situation was severe enough that the United States, Britain, West Germany, France, Switzerland, Italy, Belgium, the Netherlands and Luxemburg all agreed to sell gold into the market to try and prevent the price from exceeding $35 an ounce; and so the London Gold Pool was created.The French, who were smart enough to realize that the London Gold Pool was a loosing proposition, eventually started selling francs for dollars and sent the dollars back to the United States in exchange for gold.
By 1968, when the London Gold Pool croaked, US gold reserves had declined more than fifty two percent from their 1957 levels. In 1971 US gold reserves were 9,070 tonnes, only seventy-two tonnes more than they had been in 1935. It was clear that thirty-five dollars were no longer worth an ounce of gold. An increase in the amount of dollars (dollar inflation) reduces the dollar's value and hence prices rise. Similarly, an increase in the amount of gold in the world reduces the value of gold and causes the gold price to decline. If we knew what the increase in US money supply was from 1933 to present, and we knew how much gold had been produced since then, we could theoretically calculate what the gold ...

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"In face of increasing strain, the system eventually collapsed in 1971, following the United States' suspension of convertibility from..."

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