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Will The Drive To Devalue The Dollar Lead To A Plaza Accord 2.0?

•, Tyler Durden

On this day Richard Nixon closed the gold window. This step de facto ended the Bretton Woods system, which had been created in 1944 in the New Hampshire town of the same name and was formally terminated in 1973. The era of gold-backed currency was well and truly over; the era of flexible exchange rates had begun. Without a gold anchor, the exchange rate of every currency pair was supposed to be driven exclusively by supply and demand. National central banks — and indirectly governments as well — were at liberty to make their own decisions, free of the tight restrictions imposed by a gold standard, but they had to bear the costs of their decisions in the form of the devaluation or appreciation of their currencies.

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