Bretton Woods and Marshall Plan

[PatrykM]

Hi,

I hope it is good place to this question. I come back to education of forex and now I don t want to make any pause. I am reading Complete Forex Education by a Pro Banker, and already I am on Chapter 3 Part 3 Look in rearview mirror. I don t understand how it happened when some country quote: If, for example, the rate of some national currency skewed more than 1% to one side or the other from the fixed rate, that country should use their own gold reserves to reestablish equilibrium.) I completely don t understand how it is done, what they do with own gold they buy deutsche mark? Could somebody explain it like to somebody who are not expert from economy

And another maybe similiar question about Soros and Bank of England so then he does it on GBP/USD and Sell GBP and BoE were defend how? Because I was read that then they ended gold reserve I thought nowadays banks using money not gold.

Thank you in advance for answers.

 

[Pharaoh]

I believe that was a penalty clause for those who deviated too far from the fixed rates established under Bretton Woods. They'd either have to buy up some gold or sell some gold to get back inside the limits. Keep reading FMS and you'll find out why this sort of thing doesn't happen anymore.

What's interesting is how central bankers keep talking about gold like it has no use - while more and more central banks are quietly stocking up on gold.

 

[PatrykM]

"They'd either have to buy up some gold or sell some gold to get back inside the limits." In this case they had to buy from United States, or sell to US?
What is FMS?

 

[Pharaoh]

I assume they could buy or sell from anywhere to get their currency:gold ratio back in line, but the US would have been the biggest available money-to-gold dealer at the time.

Sorry - FMS is short for Forex Military School - the course where you are reading about Bretton Woods.