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A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932 as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold, effectively ending the Bretton Woods system. Many states nonetheless hold substantial gold reserves.
A reserve currency is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency.
Black Wednesday, or the 1992 sterling crisis, was a financial crisis that occurred on 16 September 1992 when the UK Government was forced to withdraw sterling from the (first) European Exchange Rate Mechanism , following a failed attempt to keep its exchange rate above the lower limit required for ERM participation. At that time, the United Kingdom held the Presidency of the Council of the European Union.
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic action that together facilitate international flows of financial capital for purposes of investment and trade financing. Since emerging in the late 19th century during the first modern wave of economic globalization, its evolution is marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets. In the late 1800s, world migration and communication technology facilitated unprecedented growth in international trade and investment. At the onset of World War I, trade contracted as foreign exchange markets became paralyzed by money market illiquidity. Countries sought to defend against external shocks with protectionist policies and trade virtually halted by 1933, worsening the effects of the global Great Depression until a series of reciprocal trade agreements slowly reduced tariffs worldwide. Efforts to revamp the international monetary system after World War II improved exchange rate stability, fostering record growth in global finance.
Sterling is the currency of the United Kingdom and nine of its associated territories. The pound is the main unit of sterling, and the word pound is also used to refer to the British currency generally, often qualified in international contexts as the British pound or the pound sterling.
The Bretton Woods system of monetary management established the rules for commercial relations among the United States, Canada, Western European countries, and Australia and other countries, a total of 44 countries after the 1944 Bretton Woods Agreement. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states. The Bretton Woods system required countries to guarantee convertibility of their currencies into U.S. dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold. It also envisioned greater cooperation among countries in order to prevent future competitive devaluations, and thus established the International Monetary Fund (IMF) to monitor exchange rates and lend reserve currencies to nations with balance of payments deficits.
The Belize dollar is the official currency in Belize. It is normally abbreviated with the dollar sign $, or alternatively BZ$ to distinguish it from other dollar-denominated currencies.
The Central Bank of Malaysia is the Malaysian central bank. Established on 26 January 1959 as the Central Bank of Malaya, its main purpose is to issue currency, act as the banker and advisor to the government of Malaysia, and to regulate the country's financial institutions, credit system and monetary policy. Its headquarters is located in Kuala Lumpur, the federal capital of Malaysia.
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation. A monetary authority maintains a fixed value of its currency by being ready to buy or sell foreign currency with the domestic currency at a stated rate; a devaluation is an indication that the monetary authority will buy and sell foreign currency at a lower rate.
The European Monetary System (EMS) was a multilateral adjustable exchange rate agreement in which most of the nations of the European Economic Community (EEC) linked their currencies to prevent large fluctuations in relative value. It was initiated in 1979 under then President of the European Commission Roy Jenkins as an agreement among the Member States of the EEC to foster monetary policy co-operation among their Central Banks for the purpose of managing inter-community exchange rates and financing exchange market interventions.
The sterling area was a group of countries that either pegged their currencies to sterling, or actually used sterling as their own currency.
The Nixon shock was the effect of a series of economic measures, including wage and price freezes, surcharges on imports, and the unilateral cancellation of the direct international convertibility of the United States dollar to gold, taken by United States President Richard Nixon in August 1971 in response to increasing inflation.
The Smithsonian Agreement, announced in December 1971, created a new dollar standard, whereby the currencies of a number of industrialized states were pegged to the US dollar. These currencies were allowed to fluctuate by 2.25% against the dollar. The Smithsonian Agreement was created when the Group of Ten (G-10) states raised the price of gold to 38 dollars, an 8.5% increase over the previous price at which the US government had promised to redeem dollars for gold. In effect, the changing gold price devalued the dollar by 7.9%.
A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold.
An international monetary system is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between states that have different currencies. It should provide means of payment acceptable to buyers and sellers of different nationalities, including deferred payment. To operate successfully, it needs to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade, and to provide means by which global imbalances can be corrected. The system can grow organically as the collective result of numerous individual agreements between international economic factors spread over several decades. Alternatively, it can arise from a single architectural vision, as happened at Bretton Woods in 1944.
British involvement in the Middle East began with the General Maritime Treaty of 1820. This established the Trucial States and the nearby island of Bahrain as a base for suppressing sea piracy in the Persian Gulf. Meanwhile, in 1839 the British East India Company established an anti-piracy station in Aden to protect British shipping that was sailing to and from India. Involvement in the region expanded to Egypt in 1875 because of British interests in the Suez Canal, with a full scale British invasion of Egypt taking place in 1882. Muscat and Oman became a British Protectorate in 1891, and meanwhile Kuwait was added to the British Empire in 1899 because of fears surrounding the proposed Berlin-Baghdad Railway. There was a growing concern in the United Kingdom that Germany was a rising power, and about the implications that the proposed railway would have as regards access to the Persian Gulf. Qatar became a British Protectorate in 1916, and after the First World War, the British influence in the Middle East reached its fullest extent with the inclusion of Palestine, Transjordan and Iraq.
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.
Currency war, also known as competitive devaluations, is a condition in international affairs where countries seek to gain a trade advantage over other countries by causing the exchange rate of their currency to fall in relation to other currencies. As the exchange rate of a country's currency falls, exports become more competitive in other countries, and imports into the country become more and more expensive. Both effects benefit the domestic industry, and thus employment, which receives a boost in demand from both domestic and foreign markets. However, the price increases for import goods are unpopular as they harm citizens' purchasing power; and when all countries adopt a similar strategy, it can lead to a general decline in international trade, harming all countries.
The 1967 Penang Hartal riot happened on November 24, 1967 in response to the devaluation of the Malayan dollar against the British pound sterling and the newly established Malaysian dollar.
The 1967 sterling devaluation was a devaluation of sterling from $2.80 to $2.40 per pound on 18 November 1967. It ended a long sterling crisis that had started in 1964 with the election of Labour in the 1964 general election, but originated in the balance of payments crises of the preceding Conservative government.
References
- ↑ Schenk, Catherine R. (2013). The decline of sterling: managing the retreat of an international currency, 1945-1992. Cambridge University Press. ISBN 978-0-521-87697-1. OCLC 934197928.
- ↑ "Devaluation of the Pound: Explanation | StudySmarter". StudySmarter UK. Retrieved 2024-01-23.
- ↑ Borio, Claudio E. V.; Toniolo, Gianni (2006). One hundred and thirty years of central bank cooperation: a BIS perspective. Bank for International Settlements, Monetary and Economic Dept. p. 41. OCLC 441324822.
- ↑ James, Harold (1996). International monetary cooperation since Bretton Woods. International Monetary Fund. p. 92. ISBN 0-19-510448-X. OCLC 760694324.
- ↑ Einzig, Paul (1968). Leads and lags: the main cause of devaluation. Macmillan. OCLC 249886.
- ↑ Larry Elliott (16 December 2008). "Devaluation did break Britain - but now it could be its salvation". The Guardian . Retrieved 12 January 2023.
- ↑ Bordo, Michael D.; Eichengreen, Barry (2007). A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform. The University of Chicago Press. ISBN 978-0-226-06690-5. OCLC 781253309.