www.federalreservehistory.org/essays/smithsonian_agreement www.managementstudyguide.com/bretton-woods-agreement-and-smithsonian-. The insufficiency of gold to meet global demand for international reserves in the 1960s was an important factor that led to the Smithsonian Agreement. But this agreement became mandatory in 1971, when then-US President Richard Nixon banned the exchange of US dollars for gold. The Smithsonian Agreement was signed by a group of ten countries commonly known as the G10. Although the Smithsonian agreement was hailed by President Nixon as a fundamental reorganization of international monetary affairs, he could not promote discipline from the Federal Reserve or the U.S. government. The price of the dollar on the free gold market continued to put pressure on its official price; and shortly after the 14th Japan and the EEA countries decided to let their currencies fluctuate freely on 10 February 1973. A decade later, all industrialized countries had done the same.    The ten countries that signed the Smithsonian Agreement were the Netherlands, Japan, Belgium, Sweden, France, Canada, Germany, Italy, the United Kingdom and the United States. As provided for in the agreement, the currencies of the aforementioned countries can vary by 2.25% against the US dollar. Situation: European countries fought during World War II.
As such, the world`s economies had been destroyed. Many countries had printed money to finance the enormous costs of the war. Therefore, once the war was over, many European economies risked imploding simply because of the intrinsic instability of their money markets. To avoid such an outcome, every country in the world held a conference in Bretton Woods, USA, with all the leading political leaders and economists. This was known as the Bretton Woods Conference and had a huge impact on the future monetary system and the development of the forex market. The failure of the world`s governments to establish a system in which the exchange rates of currencies would be fixed and stable left no alternative to a market for currencies free of fluctuation. That is the phase we are in today. The forex market as we know it today is the result of the failure of the Bretton Woods and Smithsonian agreements.
financial-dictionary.thefreedictionary.com/Smithsonian+Agreement The Smithsonian Agreement was a revision of the Bretton Woods Agreement of 1944, which provided for changes to fixed exchange rates. This agreement has also contributed to the creation of forex markets. As a result of the Smithsonian agreement, the US dollar was partially devalued, given that it was tied to the currencies of the countries that signed the agreement. This agreement has devalued the United States. 8.5% against gold. The transition of the global monetary system from the gold standard to modern forex markets has been far from smooth. Governments around the world worked together to conclude two pacts that were to form the basis of the modern monetary system. However, both agreements have failed. In this article, we will take a closer look at these arrangements.
The Smithsonian Agreement was an agreement signed in 1971 by 10 leading industrialized countries to settle international payments and trade at that time. The agreement provided for a change in the fixed exchange rates set by the Bretton Woods Agreement of 1944. .