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A revision to the Bretton Woods international monetary system that was signed at the Smithsonian Institution in Washington, D.C., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A December 1971 agreement between 10 nations that effectively ended the Bretton Woods System. Because of high government spending due to the Vietnam War and the Great Society program, the U.S. dollar became overvalued and was under significant inflationary pressure. In August 1971, President Richard Nixon unilaterally devalued the dollar and ended the ability to exchange it for gold. The Smithsonian Agreement formalized this act as the participating nations agreed to allow their currencies to appreciate relative to the dollar. While this Agreement kept the Bretton Woods System in place, the precedent led to its final abandonment in 1973.
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