Historical Analysis of the Role of the Dollar in International Finance - Research Paper Example

?Today there are the passions around the world reserve currency - the dollar - in the current global crisis. For people thinking today it is important to formalize and objectify the U.S. dollar in global history. It is also important to recognize and value of the dollar in the early 21st century. The modern model of wealth creation (income) is built on access to cheap credit, which, in turn, is due to issued (printed) dollars, is coming to an end. For this reason, there is good reason to believe that research in this direction will be the most important in the historical economics of the first half of the 21st century Prospects for the dollar in the near future look rather doubtful. Dollars are illegitimate world money. But there is no international agreement that would constitute dollar in this capacity. This means that the U.S. does not carry the world community no responsibility for their actions in respect of its national currency, which is reflected directly on the world financial system. Similarly, the global community has no obligation with respect to the dollar. The world depends on the U.S. dollar and the management of monetary system, but in turn depends on the United States and the international community and on its relation to the dollar. All these relations are not regulated in any way, not legalized, not codified. It is impossible to build the global financial system in such a shaky foundation and it will be understood by the international community will sooner or later. This paper is one attempt to thinking about the dollar's role in the economy of the past and present. In the history of the 20th century, in the format of the financial and economic transformation of areas of greatest interest is the process of becoming the world's reserve currency. In the early 21st century, the world's reserve currency is the dollar. The history of the dollar until 1913 is not a history of world currency. Until December 23, 1913 dollar is a common national currency. We distinguish the following dates transforming the U.S. dollar: -23 December 1913 - the creation of the Federal Reserve, now known as the Federal Reserve; -5 March 1933 - the third default of the U.S. economy; -1-22 July 1944 - Conference at Bretton Woods, which laid the perspective transformation dollar in the world's reserve currency - December 27, 1945 - the creation of the IMF, the supranational institution, designed to fully support the world's reserve currency - the dollar - August 15, 1971 - the fourth default of the U.S. economy. Refusal to convert dollars located abroad, in gold. Unilateral revision of international agreements, including the Bretton Woods;-90-years of the twentieth century - the emergence of "financial engineering" and global dominance of the "Washington consensus"; -23 March 2006 - the refusal of U.S. authorities to provide information on M3. This indicator shows the amount of dollars in circulation worldwide, 12 December 2008 - Fed refusal to provide information to Bloomberg about the recipients of more than $ 2 trillion in loans from the crisis of American taxpayers. Dollar decides the fate of the global financial system. But whether he has a legitimate and guaranteed execution of whether the United States of any obligations to the global economy? Consider the situation step by step transformation of the dollar in world currency, and the consequences of the situation. Perhaps the first place in the institutional framework regulating international monetary relations belonged and belongs to the International Monetary Fund (IMF). It is an intergovernmental multilateral monetary and credit organization with a specialized agency of the United Nations. International Monetary Fund established by the United Nations Conference on Monetary Affairs on 1 July 22, 1944 in the United States. Conference participants from 44 countries adopted the Final Act, which included the so-called Articles of Agreement of the International Monetary Fund, which act as its statutes. December 27, 1945 agreement on the establishment of the IMF has been ratified by 29 States, and March 1946 at the founding session of the Governing Council of the International Monetary Fund were adopted additional regulations governing the activities of the IMF. On March 1, 1947 The Fund has launched its operations Perhaps the first place in the institutional regulation of the Bretton Woods system, Bretton Woods agreement - an international system of money relations and the organization of trade settlement, established by the Bretton Woods conference (from 1 to 22 July 1944) The name comes from the name of resort of Bretton Woods in New Hampshire, USA. The system marked the beginning of such organizations as the International Bank for Reconstruction and Development (IBRD) and International Monetary Fund (IMF). At the end of the Bretton Woods system the U.S. dollar became a form of world money, along with gold. It was a transitional stage between gold exchange standard to the free conversion based on supply and demand. The purpose of the Bretton Woods system was the recovery and sharp increases in international trade in those years. It took the establishment of a stable equilibrium of the system of international exchange on the basis of a system of fixed exchange rates, as well as making available of resources to deal with temporary difficulties in foreign trade balance. The Bretton Woods system intended to adhere to the following principles: establish firm exchange rates of participating countries to exchange a key currency, rate lock key currency tied to gold, central banks have pledged to maintain a stable exchange rate against the key currencies (within + / - 1%) by foreign exchange intervention, exchange rate changes have been implemented through their revaluation or devaluation. Organizational element of the system was the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD). The IMF provides loans in foreign currency to cover the deficit of balance of payments in order to support the unstable currencies, monitor compliance by member countries of the principles of their foreign exchange system, provides currency cooperation countries. Over time, the Bretton Woods system came to its crisis. The forms of the crisis of the Bretton Woods monetary system, "Currency Fever" - moving "hot" money, bulk sale of unstable currencies in anticipation of devaluation of currencies and buying - candidates for revaluation, "Gold Rush" - the flight from unstable currencies to gold and periodic increase its price, panic on the stock markets, the growing problem of international monetary liquidity, massive devaluation and revaluation of the currency (official and unofficial) active currency interventionof central banks including the concerted action of several countries sharp fluctuations in official reserves, the use of foreign credits and loans to the IMF to support the currency, breaching the structural principles of the Bretton Woods system, strengthening of national and inter-exchange control, strengthening of the two trends in international economic and monetary relations - cooperation and conflict, which periodically develop into Trade and currency war. The principles of the Bretton Woods system did not correspond to the changed balance of power in the world. Monetary system based on the use of national currencies came into conflict with the internationalization of the world economy. This contradiction is intensified by the weakening of the economic position of the United States and Great Britain, who repaid the balance of payments deficit of its emission of national currencies, using their status as reserve currency. This is especially contrary to the interests of developing countries. At the moment, the world's great role of transnational corporations (TNCs) in the monetary sphere: TNK have huge short-term assets in different currencies, which can significantly exceed foreign exchange reserves of central banks of countries where they operate. These amounts escape national control and in the pursuit of profit involved in currency speculation, giving them a gigantic scale. The negative consequences of the priority role of the dollar as world currency comes from the fact that the dollar - that the national currency of one country which is subject to defaults. It is believed that the U.S. economy experienced four default: first in 1838, the last - in 1971. The third U.S. default occurred in March 5, 1933 and it is connected to the Great Depression and President Roosevelt. On the day of his inauguration on March 5, 1933 newly elected President Roosevelt announced that nearly two-fold decrease in the dollar against gold - or, equivalently, of the rise in price of gold in dollar terms. Up to this point the price of gold in dollars was rigidly fixed, and the government had no right to totally change it. Moreover, a presidential decree population pledged to take all available in a gold bullion and coins to the State - and the old, much lower price of gold. Disobeying this order, faces 10 years in prison and heavy fines. After 4 years all selected by the State of the gold was solemnly Sveza a specially built vault in Fort Knox, in Kentucky. Experts estimate that by the end of World War II, there was kept about 20,000 tons of gold, which is about 70% of the world's ... Along with the gold "robbery of the century" were declared bank holiday week (which is simply forced off in financial institutions) from for which no private investor could not retrieve their urgency at once depreciated savings. Cumulative losses of securities holders were then about $ 60 billion - an amount equivalent to the current price $ 800 billion. Fourth U.S. default has occurred August 15, 1971, when President Nixon announced that from this moment the United States cease to convert in circulation overseas dollars into gold, producing thereby a unilateral revision of the international monetary system that existed for 25 years. The President said that he has taken this action to prevent an attack of international speculators on the dollar. At the same time, this measure will reduce unemployment by 2% and to increase capacity utilization. It is true that ultimately led to the devaluation of the dollar oil shock of 1973. The 90-ies of the 20th century is considered to be the time of formation of "financial engineering." The Nobel Prize in Economics in 2006, Edmund Phelps, who currently heads the think tank "Capitalism and Society" at Columbia University, believes that "financial engineering" and monetary policy, "based on the rules," where knowledge is considered to be indeterminate certain knowledge leads us in a dangerous direction, including the contemporary crisis of the dollar. Milestone in the history of the dollar is beginning concealment of objective information on the dollar. In the financial and economic publications noted that the dollar's decline in popularity influenced the decision of U.S. Federal Reserve to cease March 23, 2006 publication of data on M3. This figure shows the amount of dollars in circulation worldwide. This forces most of the world economists estimate growth of M3 on circumstantial evidence. The second sign is necessary to recognize the date of December 12, 2008. Fed refusal to provide information to Bloomberg about the recipients of more than $ 2 trillion in loans from the crisis of American taxpayers - is a key event of the current global crisis. It seems that this event will be a key in the history of the dollar. We are now experiencing a period of transition from one stage of development of civilization to another, from civilization to civilization, from paper money to electronic. The dollar is a symbol of paper, not electronic money. And it explains a lot. Formation of money in Europe is associated with such a Europe-wide collapse, involved the millions of its inhabitants, as the era of the Crusades. The transition from gold to paper money came in during the global collapse of the world, what was the First World War. The Second World War, in a sense a continuation of the first, ending that could not be pre - transition from gold to paper money in the world money (the Bretton Woods monetary system). And now the world has entered a new era of civilization breaking down - the era of transition from paper to electronic money. And the collapse of civilization in which such a transition should take place, has already begun. Many experts are convinced that the transition to a new world monetary system without having to abandon the current reserve currency - the dollar - is impossible. In the short historical perspective it becomes obvious that the world is not so much goods and real assets, as printed dollars. The collapse of the existing world (dollar) currency and financial system is inevitable. The financial and economic model developed in the late 18th century and the beginning of the 20th has become the dominant, based on a private monopoly control over the emission mechanism (in this case, the U.S. Federal Reserve) has come to its natural conclusion. The falling dollar means the collapse of world financial and monetary system. There will remain in the presence of the real economy and the production of goods, on the one hand, and gold as the only true currency, on the other. Many experts are convinced that a return to the "gold standard" for a new stage of civilization of human development is impossible. Return to gold - a return to the archaic. The era of electronic money will require new conceptual approaches and to the functioning of the global financial system, and the scope of activity of a new world reserve currency. Ills of modern global financial system come from the private nature of control over monetary circulation (in the U.S.) and as a consequence, monetary emission current single measure of value - the U.S. dollar. The current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. Historical facts prove the long-running process of the emergence and strengthening of the dollar as national currency. The dollar was the standard scheme of define it in the national currency, the binding of gold, equivalent to paper and completes its life activity as a sign of inconsistency of paper to the real processes at present in a complex global environment and global economic crises. But the United States in the 20th century, set up an experiment on a global scale for the implementation on money. While the dollar was monitored by international organizations (the Bretton Woods system, Bretton Woods agreement the International Monetary Fund, World Bank, etc.) was tied to gold reserves, it could save the world currency role. But there are people in power, followed by financial ones. In the mid-20th century, the U.S. set for the need to exchange dollars for gold, in response, the U.S. unilaterally abandoned the dollar tied to gold and floated out this control mechanism Dollar - personal interests aces. Now the dollar, exported outside the United States has actually committed the United States. A impairment organizing dollars, the U.S., in fact, made the duty of depreciating over time. Depreciation of the dollar by dollar planned emissions for the U.S. balance of payments deficit. Function of the dollar is still vitally important for both "little" man, and for the strong community of parasites that feed on the issue of the dollar, allowing them to unlimited expansion in the whole world and to the same (due to the universal spread of low-cost loans) to receive a guaranteed income from any traffic. Exacerbated a fundamental contradiction between the role of the dollar as world reserve currency and the national interests of the U.S. economy. But without a strong economy is not strong army and vast domestic market, which is tied to the economies of most countries, as the markets of Rome was tied all the Mediterranean. American financial power in the future can only choose between two scenarios: inflationary and deflationary. Global history of mankind - this is not some mechanistic addition of the history of nations, empires, nation states and biographies of prominent figures. Global history of mankind will absorb semiotic phenomena of a time, leaving many outside review. In the history of the 20th century, in the format of the financial and economic transformation of areas of greatest interest is the process of becoming the world's reserve currency - the dollar. References Duncan Richard (2003). The Dollar Crisis: Causes, Consequences, Cures Wiley; 1 edition Gennaro Vince (2007). Diamond Dollars: The Economics of Winning in Baseball. Pub. By Maple Street Press, Dist. by Potomac Books Bergsten C. Fred , Williamson . Dollar overvaluation and the world economy, Institute for International Economics (U.S.), http://www.dollarsandsense.org/ Read More