Fourth, the fantastic costs associated with the Vietnam War created huge inflationary pressures which drove down the value of USDs as compared with gold (even at the fixed rate of exchange).
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What the IMF was supposed to do was strictly this: provide loans to countries whose currencies were having trouble staying at a fixed rate of exchange to the dollar, so that that rate would be maintained.
Venezuela has a fixed official exchange rate of 2.15 to the dollar.
In recent days, Iceland has taken over the country's second-biggest bank, fixed the exchange rate of its plummeting currency, and asked Russia for a euro4 billion loan as it scrambled to stop the collapse of its economy.
The crises of the 1990s did, however, tend to have one thing in common: they all had some kind of fixed exchange rate, often a fixed peg or link to another currency, usually the dollar, or an exchange-rate band, again usually linked to the dollar.
What brought Argentina down was the combination of its fixed exchange rate, which made its currency uncompetitive, with persistent fiscal deficits.
Like any fixed exchange-rate system, a currency board offers the prospect of a stable exchange rate, which can promote both trade and investment.
Five years ago Russia had a big budget deficit, a fixed exchange rate and a lot of high-coupon debt.
The real test for joining the euro should be whether an economy is flexible enough to cope with the strain of a permanently fixed exchange rate.
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But as raising interest rates to protect the currency means slowing the economy, a government might at some point decide that the pain of maintaining the fixed exchange rate is not worthwhile.
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Something similar happened in Argentina after it adopted its convertibility plan: people started to believe that biting the bullet of a permanently fixed exchange rate was enough, on its own, to cure the economy's problems.
"At the root of the euro upheaval is a balance of payment crisis caused by the cumulative effects of a 13-year-old one-size-fits-all monetary policy and a fixed exchange rate for a collection of disparate countries in very different stages of economic and structural development, " he argues.
Third, the fixed exchange rate can get badly out of line with those of trading partners.
He announced a series of currency controls and fixed the exchange rate against the dollar (see article).
The balance of payments and exchange rates were making news, and the slow break-up of the Bretton Woods fixed-exchange rate system was under way.
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The bigger problem, though, is the effect of fast economic growth coupled with a fixed exchange rate.
This means that virtual items acquired within Entropia Universe have a real cash value, and a participant may, at any time, initiate a withdrawal of their accumulated PEDs back into real world currencies according to the fixed exchange rate, minus transaction fees, the minimum amount for a withdrawal is 1000 PED.
FORBES: Virtual Entropia Universe Property Sells for $335K Real Dollars
Unlike days of old, Washington doesn't need piles of gold, nor does the government need to promise to exchange gold at a fixed rate for dollars, as it did under the traditional gold standard.
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