According to literature, there have been many factors that led to the destruction of global monetary systems since the fall of Bretton Woods. Their most notable disagreement was with the notion of having exchange rates that could be adjusted within the global dollars world system. Economic liberalism is the intellectual basis of this phenomenology. Second, the existence of weaker forces was the basis of the opposing view. This led to the conclusion of the exchange rate as a whole and its flexibility being detrimental to free trade and economic commerce. (Thomas Costigan and al. 104). The aftermath of the 2007-2009 global financial crisis and the ongoing debate about the role of global imbalances in the cause of this crisis have brought into focus the need to reform the GESS Dollar world’s international monetary system (Thomas Costigan and co 104). In this article, we argue that the dollar global system is immune to current and international account imbalances as long as these continue to be a significant threat to stability of the economy and financial system.
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Cagliesi and co. claim that the U.S. Dollar has been called one of the most important currencies in the world, or a reserve currency system. It is backed mainly by the largest gold reserves, since the Bretton Woods Agreement. Numerous countries had U.S. Dollar reserves. Instead of having to accumulate gold reserves, this indicated the need for dollars to be stored. The acquisition of U.S. (139) was eventually required by governments as they considered the purchase of safekeeping units for the dollar within the dollar-based international currency system. Due to the increased demand for Treasury securities and budget deficits to fund domestic programs such as the Great Society and Vietnam War, the United States began to flood the market with paper currency. A number of countries switched to gold their dollars as a result of growing concerns about the stability and liquidity of the U.S. Dollar. Due to the increased demand for gold, Nixon ordered that dollars be delinked from gold. (Cagliesi and al. 132). The result was a flood of exchange rates. However, Cagliari et al. Cagliari et al. (141) show that the U.S. is still the largest global reserve in the dollar-based international monetary system, despite prolonged periods of high unemployment rates and inflation rates.
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