AN HISTORICAL EXAMINATION OF THE VALUE OF

THE US DOLLAR IN RELATION TO THE INTRODUCTION OF

NEW INTERNATIONAL CURRENCIES

DISSERTATION

Submitted by MARIA P. GOMEZ

ID 10005045

Supervisor Dr GEORGE KAPAYA

For the degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)

UNIVERSITY OF WALES INSTITUTE

Cardiff

TABLE OF CONTENTS

ABSTRACT4

ACKNOWLEDGENMENT5

MACROECONOMICS10

Keynesian school10

New Classical Macroeconomics11

MONETARY ARRANGEMENTS11

THE DOLLAR SHORTAGES AND THE MARSHALL PLAN18

THE U.S. BALANCE OF PAYMENTS CRISIS (1958-68)20

RETURN TO CONVERTIBILITY21

THE GROWTH OF INTERNATIONAL CURRENCY MARKETS21

THE DECLINE OF U.S. MONETARY INFLUENCE22

THE DECLINE OF THE DOLLAR23

THE PARALYSIS OF INTERNATIONAL MONETARY MANAGEMENT "FLOATING"24

THE "NIXON SHOCK"26

INTERNATIONAL CURRENCY RANKINGS28

ROLES OF AN INTERNATIONAL CURRENCY29

ADVANTAGES OF HAVING AN INTERNATIONAL CURRENCY29

DISADVANTAGES OF HAVING AN INTERNATIONAL CURRENCY31

THE EURO32

The effects on business in the euro zone34

Analyzing quantitative data37

Analyzing qualitative data38

Types of qualitative analysis processes38

Summarising data39

Categorising data40

Structuring data using narrative40

Reading for research and Writing up40

BRIEF HISTORY42

SIZE OF UNITED STATES vs. EUROPE (in trillions)45

U.S. Dollar and the Chinese currency48

The future of the International Monetary System50

A more balanced International Monetary System52

Reforming the International Payment System56

RELATION BETWEEN DOLLAR-EURO AND OIL57

US IMPORTS OF CRUDE OIL59

IRAN AND OIL61

ABSTRACT

The main reason of this study is to analyse the function and significance of the US dollar as an international currency and its use for the trade between nations, during the WWII and the post-war period; starting from the US economy and its consequences in other countries. How it would affect the US economy and international trade if the currency is swap for different one or a creel of currencies, like the euro, the sterling pound, the yen or the Chinese reminding. According to that, this study started analysing the historic role that the dollar had in the post war time and how influenced the development of a US economy, and the creation of Bretton Wood method, and how was the shift from the gold standard to the US dollar and how it affected the economy of the nations. The dollar as international currency gives to the US a lot of political power in international relations, as dominant currency is associated with political and economic world leadership. After the European integration and the creation of the euro, how it affected trading between the US and Europe and all countries, and what are the political implications, as the new currency began to surpass the dollar in international transactions. How the devaluation of the dollar have affected international trade, especially oil, and the decision of the OPEC to change the currency for euro for all its transactions. Some decisions are based on economics, but in some cases politics factors influenced those decisions.

ACKNOWLEDGENMENT

Praise the LORD. (Psalm 117)

I want to thank from the bottom of my heart first of all to my father and my family, who have always been a source of inspiration for me, for giving me unconditional support and encouragement in all aspects of my life.

It is a pleasure to thank those who made this dissertation possible, my supervisor Dr. George Kapaya, who has been supportive, and all my teachers during the MBA for their contribution and cooperation in developing my studies and my career.

I would like to thank all the staff of LSC for their help and support, especially staff from the library that have been ...