INTERNATIONAL MONETARY SYSTEMS AND MARKETS
S. 'BAYO ADETIFA (BSC, FCIB, FCA, AMNIM, ACTI, ACS, MBA MSC)
CHAPTER 5 OF INTERNATIONAL BUSINESS FINANCE IN NIGERIA BY THE SAME AUTHOR
The centre-piece of international monetary systems and markets is Europe and the North America with emphasis on the United States which has played a very prominent role in the programmes and policies of the multilateral financial institutions such as the International Bank for Reconstruction and Development (IBRD) and the Bretton Wood Systems
5.02 EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEMS
At the beginning of the International monetary systems, particularly between the early nineteenth and twentieth centuries Gold was the standard of measurement of many international currencies. Gold has the features of the modern day money because of its desirable properties such as portability, acceptability, durability and recognisability.
The Intrinsic value of Gold as a standard of measurement is almost invariably equal to the extrinsic value, hence its production cost is very high with serious limitation of availability. One particular ingredient of the concept of money not applicable to Gold as commodity money is divisibility. Gold is not easily divisible and where divisible not easily measurable. Besides, it is very expansive to produce and limited in supply, hence countries using the Gold standard found substitutes in Government issued paper money (Bank notes and deposits). However, such issues not backed by Gold reserve is called Fiduciary issue which usually leads to inflation.
5.03 THE BRETTON WOODS SYSTEM
The Gold standard gain prominence in the measurement of the United States Dollar (US$) and Pounds Sterling (£). For example the exchange rate of the United States dollar was fixed at US$20.67 per ounce of gold between 1834 and 1933 while that of pound sterling was fixed at £3.17s . 10/12p between 1821 to 1914, thus, any country using the...