Before complexity

After the second world war, the international monetary system consisted of a state of fixed exchange rates. Meaning, the system was established under the Bretton Woods agreement signed in 1944. The agreement required all central banks to keep their reserves in either gold, US dollars or pound Sterling. The dollar was pledged to gold backup at 35$ per ounce. The question arises, what happens if the dollar appreciate or devalues against gold?

The answer became evident throughout the years when several dollar crises resulted in a devaluation against gold to $38 per ounce. There were small modifications to the system but the system was doomed to collapse. In 1973 the entire structure of fixed exchange rates was scraped, resulting in loosing the fixed ties to gold and all major currencies against the dollar became floating.