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America’s most popular export…

 

It’s all about the Benjamins…  The story of the $100 bill is the story of U.S. money itself, and that story is opening a new chapter:

The hundred is the ultimate icon of American monetary strength. “It’s the closest thing to a global currency,” Chris Jones writes, “with about 60 percent of them somewhere other than here, making the Benjamin the most legal and threatened of tenders.” It’s getting a makeover…

Read a feature-by-feature rundown of the upgrade at “The New Hundy: A Study Guide.”

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As we button our wallet pockets, we might recall that it was on this date in 1971 that then-President Richard Nixon declared that the official U.S. price of gold would be raised from $35 to $38 per ounce, devaluing the dollar, and effectively ending the Bretton Woods system of international financial exchange.  Earlier, in August of that year, Nixon had suspended the convertibility of the dollar into gold; still, the dollar was pegged at the $35 value stipulated by Bretton Woods.  In changing that value, Nixon ushered in the era of freely-floating currencies that remains to this day.

What has become known as “the Nixon shock” was a response to an overvalued dollar (a result of national debt incurred in the Vietnam War and the Great Society programs), and a subsequent move by nations (first West Germany, then Switzerland and France) to redeem their dollars for gold.  U.S. gold reserves fell by half from their level a decade earlier, to $10 Billion, and the U.S. feared a “run” on that remainder.  The suspension of convertibility addressed that danger, and (along with the price freeze, minimum wage guarantee, and import tariffs that accompanied it) helped both to stabilize the U.S. economy (temporarily- the period of “stagflation” was relatively soon to follow) and to bring the other developed economies to the negotiating table.  The results of that parlay, The Smithsonian Agreement, raised the “value” of the gold to $38 per ounce, eliminated convertibility as feature of the international currency regime, appreciated other currencies against the dollar, and focused efforts to balance the world financial system on special drawing rights alone.

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Written by LW

December 18, 2013 at 1:01 am

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