Smithsonian Agreements… President Nixon removed the world from the gold standard in 1971. He feared, however, that free market operations on foreign exchange markets in many currencies would lead to necessity and devaluation. As a result, he convinced many countries to enter into an agreement called the Smithsonian Agreement. This agreement had largely failed since it lasted less than a few years and ended with the total suspension of the foreign exchange markets! At its meeting in December 1971 at the Smithsonian Institution in Washington D.C. The Group of Ten signed the Smithsonian Agreement. The United States has promised to attach it to the dollar at $38/ounce (instead of $35/ounce); In other words, the USD lost 7.9 per cent. with 2.25% trading margins, and other countries have agreed to revalue their currencies against the dollar: yen -16.9%; Deutsche Mark up 13.6%, French franc up 8.6%, British pound the same, Italian lira up 7.5%. [3] The group also planned to balance the global financial system solely with special drawing rights. The lack of gold to meet global international reserve requirements in the 1960s was an important factor that led to the Smithsonian agreement. However, this agreement became mandatory in 1971, when then-US President Richard Nixon banned the exchange of U.S. dollars for gold. The Smithsonian agreement was signed by a group of ten countries commonly known as G10.

The Bretton Woods Conference of 1944 established an international fixed exchange rate system based on the gold standard, in which currencies were pepped to the U.S. dollar, which can be converted to gold even with $35/ounce. President Nixon`s decision to “close the golden window” ended the U.S. commitment to set a fixed price for gold. The U.S. dollar was now a Fiat currency. The decisions contributed to the abandonment of the gold standard that began in the early 1930s, when Congress passed a joint resolution preventing creditors from demanding gold repayment. The then president, Franklin D.

Roosevelt, ordered individuals to return high-value gold and gold certificates to the Federal Reserve for a fixed price.