Kevin Hua on Nostr: What happened after Bretton Woods: After WW2, European countries return their monies ...
What happened after Bretton Woods:
After WW2, European countries return their monies to the pre-war parity, making euro monies overvalued and the USD undervalued, also making imports from the US cheaper and exports to the US more expensive, european countries ran a deficit trade balance at the time whereas the US ran a surplus trade balance. Also during that time, the european countries were advised by the Austrians (hard money type), whereas the US was more inflationist.
Over time, as a result the situation reversed, now the euro monies became the undervalued ones and the USD became overvalued, the trade balance situation reversed as well. Now it became expensive to import from the US and cheap to export to the US. The so-called "dollar shortage" became "dollar surplus". With the depreciating USD, european govt became restless upon their USD holdings and started to redeem their USD for gold. But the US govt kept on inflating the USD. This situation cannot last, and thus bring about the collapse of the Bretton Woods.
After WW2, European countries return their monies to the pre-war parity, making euro monies overvalued and the USD undervalued, also making imports from the US cheaper and exports to the US more expensive, european countries ran a deficit trade balance at the time whereas the US ran a surplus trade balance. Also during that time, the european countries were advised by the Austrians (hard money type), whereas the US was more inflationist.
Over time, as a result the situation reversed, now the euro monies became the undervalued ones and the USD became overvalued, the trade balance situation reversed as well. Now it became expensive to import from the US and cheap to export to the US. The so-called "dollar shortage" became "dollar surplus". With the depreciating USD, european govt became restless upon their USD holdings and started to redeem their USD for gold. But the US govt kept on inflating the USD. This situation cannot last, and thus bring about the collapse of the Bretton Woods.