Creator Of The Money
Brettons Woods System
It is an international conference after the Second World War, discussing the best way to rebuild the world economy is severely depressed by the war. Result of this conference emerged the World Bank and the International Monetary Fund (IMF).
In the matter of currency, their decision to introduce a paper currency which has a fixed exchange rate. The United States Dollar was tied with 1/35 of a troy ounce (888 671 milligrams of gold), then the currency of other countries is tied to the value of USD.
The US government when it was promised to allow redeemable per USD in the hands of any party to the actual gold.
It is an international conference after the Second World War, discussing the best way to rebuild the world economy is severely depressed by the war. Result of this conference emerged the World Bank and the International Monetary Fund (IMF).
In the matter of currency, their decision to introduce a paper currency which has a fixed exchange rate. The United States Dollar was tied with 1/35 of a troy ounce (888 671 milligrams of gold), then the currency of other countries is tied to the value of USD.
The US government when it was promised to allow redeemable per USD in the hands of any party to the actual gold.
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Achievements in the Bretton Woods
conference in 1944 led to the creation of
money backed up and tied to gold. It is called gold backed
paper money, which
is money in the form of paper currency instead
of gold, it will be better because it is more lightweight, easy to carry and amended and saved. It is also known as representative money,
because it represents the amount of
gold or silver
that is in bank
deposits.
In 1971, the last agreement was canceled, the cause is due to the amount of physical gold is not enough to cover the dumping of paper money in the market. It should be every currency that is printed there must be gold in tow.
However, the problem begins when the USA government to print more paper currency than the amount of physical gold in possession. The action is called Fractional reverse system.
In 1971, the last agreement was canceled, the cause is due to the amount of physical gold is not enough to cover the dumping of paper money in the market. It should be every currency that is printed there must be gold in tow.
However, the problem begins when the USA government to print more paper currency than the amount of physical gold in possession. The action is called Fractional reverse system.
The prints banknotes
USD can be redeemed for physical gold for any international
party, but not for
those people. As
a result, the French government demanding physical gold when carrying large amounts of paper money USD. It is worrying because
of the amount of gold USD limited and also worried French
action will be emulated
by other national
governments. If
this happens, the government will be filled with paper money without
the gold again.
"Fractional reverse system"
Monetary
policy at the basis of the modern banking system. Under FRS,
banks
are required
to hold only a fraction (typically 12 per cent) of the depositors' funds as cash
reserves. The remaining 88 per cent of deposited funds can be loaned out to create
new deposits which in turn create new loans ... and so on, exerting a multiplier
effect on the total money supply. However, in case of a bank run, this policy
can cause banks to suffer huge losses and may even push them into bankruptcy
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FIAT MONEY
Once you understand what the Fractional reserve banking and a requirement, it is easier for us to understand how today's paper money was invented. It all started in 1971, the emergence of Fiat Money is paper money that are all around us today. It is a currency that is not backed by any precious metals like gold and silver. It is no longer representative money as previously described.
Some believe fiat money is created because of the amount of gold that was not enough to offset the economic growth so quickly. Gold mines failed to produce enough gold to money creation. On policies to boost the economic growth, reliance on physical gold is no longer effective. Consequently fiat money is created.
The word 'fiat' is derived from the latin word meaning "let it be done '. It is true, fiat money in existence today can be printed by the government based on their needs, as being created 'from the thin air' or from wind alone.
what is the basis of creation of paper money today ?. It is based on the will and the confidence and trust of the public of its value.
If suddenly all the people in the world, refused to recognize the USD in their transactions. the USD will have a problem, so the other country in the world.
This fiat paper money value is mostly determined by the confidence of the people to the government that issued it, it is left floating 'floating' in the economic environment in the country.
That is why if the government simply print fiat paper money, it is not making it rich, but the value of its currency more passing.
Normally, when the war broke out, or economic problems occur such as the USA and Europe at this time, the government through their national banks will print more fiat paper money in the face of both the war or the credit crunch, when the print is so terrible to exceed the actual economic developments in the country, inflation or currency depreciation will occur. The process of increasing the amount of paper money in the world or a country's market is called money supply.
Thus, printing paper money in a country controlled by the government MUST suggest, in line with developments in the industry and business in the country, if not the number of banknotes produced in excess of the rate of growth of industry and the country as business, the result will be the currency plummeted and power purchase contracts . When the inflation will occur.
Once you understand what the Fractional reserve banking and a requirement, it is easier for us to understand how today's paper money was invented. It all started in 1971, the emergence of Fiat Money is paper money that are all around us today. It is a currency that is not backed by any precious metals like gold and silver. It is no longer representative money as previously described.
Some believe fiat money is created because of the amount of gold that was not enough to offset the economic growth so quickly. Gold mines failed to produce enough gold to money creation. On policies to boost the economic growth, reliance on physical gold is no longer effective. Consequently fiat money is created.
The word 'fiat' is derived from the latin word meaning "let it be done '. It is true, fiat money in existence today can be printed by the government based on their needs, as being created 'from the thin air' or from wind alone.
what is the basis of creation of paper money today ?. It is based on the will and the confidence and trust of the public of its value.
If suddenly all the people in the world, refused to recognize the USD in their transactions. the USD will have a problem, so the other country in the world.
This fiat paper money value is mostly determined by the confidence of the people to the government that issued it, it is left floating 'floating' in the economic environment in the country.
That is why if the government simply print fiat paper money, it is not making it rich, but the value of its currency more passing.
Normally, when the war broke out, or economic problems occur such as the USA and Europe at this time, the government through their national banks will print more fiat paper money in the face of both the war or the credit crunch, when the print is so terrible to exceed the actual economic developments in the country, inflation or currency depreciation will occur. The process of increasing the amount of paper money in the world or a country's market is called money supply.
Thus, printing paper money in a country controlled by the government MUST suggest, in line with developments in the industry and business in the country, if not the number of banknotes produced in excess of the rate of growth of industry and the country as business, the result will be the currency plummeted and power purchase contracts . When the inflation will occur.
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