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International Monetary System Essay

4576 words - 19 pages

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SHANGHAI FINANCE UNIVERSITY

SCHOOL OF INTERNATIONAL ECONOMICS AND TRADE

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DEPARTMENT OF INTERNATIONAL ECONOMICS AND TRADE

INTERNATIONAL MONETARY SYSTEM

The History of IMS and its Potential Reformulation

Introduction to IMS, Evolution of IMS, Beginning of Bretton Woods and Ending, Dirty floats, Current situation and Reformed Monetary system

WINNIE PAUL NDOSA (2011178102)

12/24/2013

|The History of IMS and its Potential Reformulation |
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 The
second
section
is
an
analysis
of
the
current
monetary
system.
The
world
is
facing
two
major
issues
right
now, the
potential
collapse
of
the
euro
zone
and
the
Chinese
holding
of
US
Treasury
debt.
In
this
section,
I
will
explore
these
issues
in depth
and
highlight
how
the
history
of
the
international
monetary
system
has
led
us
to
this
point.



 In
the third
and
final
section,
I
highlight
several
possibilities
for
reform.
This
is
not
a
comprehensive
plan
of
action,
but
rather
ideas
of
where
I
see
reform
is
needed.
Actual
reform
possibilities
have
been
circulating
for
years,
and
these
ideas
represent
a
combination
of
these.

Evolution
of
the
International
Monetary
System


The
Classic
Gold
Standard
(1876­1914)


The
Rise
of
the
Gold
Standard
in
Great
Britain


The
classic
gold
standard
started
for
most
countries
in
and
around
the
1870s,
but
for
Great
Britain,
it
was
far
earlier.

Many
date
the
advent
of
the
gold
standard
in
Britain
to
1717,
when
Sir
Isaac
Newton
set
the
price
of
gold
at
too
low
a
rate,
causing
silver
to
disappear
from
the
country
entirely.
The
actual
date
of
demonetization
didn’t
occur
until
1774,
the
year
when
gold
was
recoined,
silver
was
recognized
as
subsidiary,
and
limits
were
set
on
the
use
of
silver
coins
in
excess
of
25
pounds.




 In
the
years
leading
up
to
the
adoption
of
the
gold
standard
by
continental
Europe,
Britain
faced
several
instances
of
convertibility
issues.
When
the
Reign
of
Terror
took
place
in
early
1793,
there
was
a
sharp
outflow
of
capital
in
the
form
of
both
gold
and
silver
from
France.
This
produced
large
amounts
of
liquidity
in
Britain,
fueling
an
ongoing
mania
to
its
peak.
Eventually
the
assignat,
the
French
paper
currency
of
the
time,
collapsed,
forcing
a
reflow
of
money.
The
British
people
panicked,
and
a
bank
run
ensued.
In
response,
the
British
government
ordered
the
Bank
of
England
to
suspend
convertibility,
well
before
reserves
ran
out
in
an
effort
to
keep
gold
reserves
from
becoming
exhausted
if
all
the
increased
notes
to
finance
the
war
were
cashed
in.
In
1825,
not
long
after
convertibility
resumption,
Britain
once
again
faced
the
threat
of
a
bank
run.
The
Bank
of
France
stepped
in
to
aid
them
at
this
time, easing
the
fear
of
suspension.



 
Britain
recognized
the
need
to
act.
Suspension
of
the
currency
led
to
an
inconsistent
system...

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