- Smithsonian Agreement
The Smithsonian Agreement was a December 1971 agreement that ended the
fixed exchange rate s established at theBretton Woods Conference of 1944.History
The
Bretton Woods Conference of 1944 established an internationalfixed exchange rate regime in which currencies were pegged to theUnited States dollar , which was based on thegold standard .By 1970, however, it was clear that the exchange rate regime was under threat, as the United States dollar was greatly overvalued because of heavy American spending on
Lyndon B. Johnson 'sGreat Society and theVietnam War . The American economy was also coming under seriousinflation ary pressures.In response, on
August 15 ,1971 ,Richard Nixon had the United States unilaterallydevalue the United States dollar, announced suspension of convertibility of dollars into gold and effectively ending the gold standard. The United States then entered negotiations with its industrialized allies toappreciate their currencies.Meeting in December 1971 at the
Smithsonian Institution , the Group of Ten signed the Smithsonian Agreement. In the Agreement, the countries agreed to appreciate their currencies against the United States dollar.Although the Smithsonian Agreement was hailed by President Nixon as a fundamental reorganization of international monetary affairs, it quickly proved to be too little and of only temporary benefit. The gold value of the dollar was realigned again in 1973, from $38.02 to $42.22. In addition, further devaluation occurred against other European currencies. The end of the system came in March 1973 when the major currencies began to
float against each other. A few currencies, such as the British pound, had begun to float earlier.ee also
*
Currency
*Sherman Silver Purchase Act
*United States Mint
*ISO 4217
*Exchange rate
*History of money External links
* [http://www.britannica.com/eb/article-61797 Britannica]
* [http://www.anz.com/edna/dictionary.asp?action=content&content=smithsonian_agreement ANZ]
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