On 13 September 1971, just before the ministerial meeting of the Group of Ten, the Finance Ministers of the EEC countries agreed on the common position which they would adopt at that meeting. This position included, among other things, the need to reorient the currencies of all industrialized countries, including the dollar, against gold and the abolition of the US import surtax. The differences between the positions of the industrialized countries resulted in the fact that, at the meetings of the Finance Ministers and the Governors of the Central Banks of the Group of Ten on 15 and 16 September, there was very little consensus, with the exception of generalities. Ministers and Governors merely agreed on the need for a very significant adaptation to strengthen the position of the United States, with appropriate adjustments in the positions of other countries; whereas a large part of this adjustment should be achieved through selective monetary adjustment; and that “fair trade agreements and [military] burden-sharing” should be considered. Divergences continued on key issues: exchange rates, the approximate level of the necessary improvement in the US position and the date of abolition of the US import supplement. It was clear that multilateral negotiations were large in nature and complex. The failure of the world`s governments to establish a system in which the exchange rates of currencies would be fixed and stable left no alternative to a market for currencies free of fluctuation. That is the phase we are in today. The forex market as we know it today is the result of the failure of the Bretton Woods and Smithsonian agreements. The deal devalued the U.S. dollar by 8.5 percent against gold, raising the price of an ounce of gold from $35 to $38. The other G10 countries have agreed to revalue their currencies against the U.S.
dollar. President Nixon hailed the deal as “the most important monetary deal in the history of the world.” President Nixon removed the world from the gold standard in 1971. However, he expressed concern that free market operations in foreign exchange markets would bring difficulties and devaluations to many currencies. That`s why he convinced many countries to make a deal called the Smithsonian Agreement. This agreement had largely failed because it lasted less than a few years and resulted in the total suspension of the foreign exchange markets! With the agreement of the Board of Directors, the Managing Director sent a message to all The Fund`s Governors on August 19….