WASHINGTON, D.C., November 18, 2012 — Now that we have picked our commander in chief for our upcoming war, let us take a look at how we got to this point. As is always the case, to understand the future, you must look to the past.
Bretton Woods, NH, July 22, 1944 — 730 delegates from the 44 allies of World War II signed the Bretton Woods Agreement, simultaneously creating the International Monetary Fund and establishing the U.S. dollar as the world reserve currency.
This system specified that one troy ounce of gold would be worth $35 U.S., and that the U.S. would redeem Federal Reserve notes from foreign governments at that rate, even though the country had been off the gold standard for almost 12 years. Other countries pegged their currency to the dollar, fixing exchange rates for the member states.
The Federal Reserve quickly accumulated massive quantities of gold from all around the world in return for this paper currency, which other nations held in reserve for international exchanges, and which, unlike gold, earned interest in American financial markets.
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