Thread by @MultipolarIndia

#Thread #History #Facts #BrettonWoods

PART - 1 of a multi-part series on the rise of the US💲, US Hegemony and the current transition from a Unipolar to a Multipolar World.

US currency was pegged to gold until 1933 as per the Bretton Woods system agreed upon by 44 countries.

On April 5, 1933 a draconian announcement came in newspapers in US proclaiming the Executive Order 6102. It stated that anyone living in US, citizen/foreigner was required to turn in all gold bullion, gold coins and gold certificates to the US govt before May 1, 1933. The same a

applied to businesses and corporations. The government promised to pay the official price of $20.67 for each ounce submitted. However, violators could be imprisoned for up to ten years. Exceptions were - jewellers, industrial holdings, dentist's inventories and rare collectors.

Furthermore, the public could still own a token amount of the yellow metal (or gold certificates), up to $100. But for the most part, it was now illegal to hold gold in America.

Before the First World War, international trade was conducted based on the gold standard. Countries

with trade surpluses accumulated gold and those with trade deficits gave away their gold.

"We have gold because we cannot trust governments," President Herbert Hoover famously said in 1933 in his statement to Franklin D. Roosevelt. This statement foresaw one of the most

draconian events in U.S. financial history: the Emergency Banking Act, which forced all Americans to convert their gold coins, bullion, and certificates into U.S. dollars.

The gold standard is a monetary system where a country's currency or paper money has a value directly

linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency.

For example, if the U.S. sets the price of gold at $500 an ounce, the value of the dollar would be 1/500th of an ounce of gold.

A fiat system, by contrast, is a monetary system in which the value of a currency is not based on any physical commodity but is instead

allowed to fluctuate dynamically against other currencies on the foreign-exchange markets. The term "fiat" is derived from the Latin fieri, meaning an arbitrary act or decree. In keeping with this etymology, the value of fiat currencies is ultimately based on the fact that they

are defined as legal tender by way of government decree.

The United States had been on a de facto gold standard since the 1830s and de jure gold standard since 1900. In 1913 the gold standard was built into the framework of the Federal Reserve. The law required the Federal

Reserve to hold gold equal to 40 percent of the value of the currency it issued and to convert those dollars into gold at a fixed price of $20.67 per ounce of pure gold.

During the financial crisis of 1933 that culminated in the banking holiday in March 1933, large quantities of

of gold flowed out from the Federal Reserve. This domestic drain occurred because individuals and firms preferred holding metallic gold to bank deposits or paper currency. Some of the gold flowed to foreign nations. This external drain occurred because foreign investors feared a

DEVALUATION OF DOLLAR. In March 1933, when the Federal Reserve Bank of New York could no longer honor its commitment to convert currency to gold, President Franklin Roosevelt declared a national banking holiday. During the first phase, in the spring and summer of 1933, the

Roosevelt administration suspended the gold standard.

Multiple measures were taken after by the US govt. including the above mentioned Executive Order 6102, to give the US President the power to control international and domestic gold movements. Together, these measures weakened

the dollar's link to gold. The dollar nominally retained its value, but the Department of the Treasury would not exchange dollars for gold and forbade the Federal Reserve from doing so. To ordinary men and women, in other words, the dollar’s value in terms of gold (and other

goods) was uncertain. All of this was done apparently to help America recover from the Great Depression.

After the Second World War, under the Bretton Woods international monetary agreement of 1944, the gold standard was kept without domestic convertibility.

Under this system,

many countries fixed their exchange rates relative to the U.S. dollar and central banks could exchange dollar holdings into gold at the official exchange rate of $35 per ounce; this option was not available to firms or individuals. All currencies pegged to the dollar thereby had

a fixed value in terms of gold. Starting in the 1959–1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate, reducing U.S. economic influence. This, along with the

fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led U.S. President Richard Nixon to end international convertibility of the U.S. dollar to gold on August 15, 1971 (the "Nixon Shock").

IMPLICATIONS OF THE ABOVE
- US can keep printing money to finance its own wars and agendas without consequences
- Dollar appreciation leads to relative depreciation of other countries' currencies

India, Russia, China etc are moving towards DE-DOLLARISATION to prevent this.

Sources - Fed Reserve History, Investopedia, Various Blogs, Multipolar India research and analysis.

Follow for more threads on De-dollarisation, Bretton Woods system, end of the Unipolar world and the beginning of a Multipolar World.

*ERROR - First tweet says "US currency was pegged to gold until 1933 as per the Bretton Woods system", it is actually 1971. Wrote 1933 by mistake. Apologies. Unfortunately Twitter doesn't allow editing.