The Jamaica Agreement Demonetized Gold

Even today, there are trends in monetary and financial relations that can be seen as a return of gold to the global monetary system. Again, these trends are related to the 2008 financial and economic crisis. It revealed a number of global problems that have not yet been resolved and which, therefore, create all the conditions necessary for the volatility of the global monetary system and the global economy [10]. These may include maintaining innovation in the financial market and, in particular, the uncontrolled use of derivative financial instruments; The imperfection of flexible exchange rates and their volatility; the absence of a global regulatory financial system capable of retaining the role of international financial markets as an independent regulator of the global economy; the increase in U.S. public debt due to policy that stimulates public demand, which is likely to ease, creating risks for holders of this value around the world, etc. The problem of maintaining international liquidity was also acute during the crisis. International banks suddenly faced the shortage of dollars. Businesses have started to accumulate cash. In these circumstances, public sector liquidity has replaced private sector liquidity. As a result, the role of gold and foreign exchange reserves has become more important. In 1965, when France was pushed to increase its dollar for the conversion of gold as a result of the rise in monetary growth in the United States, it had converted enough of its reserves into gold, so that its threat to push for a rise in the price of gold was credible. An increase in the price of gold should have led to a significant redistribution in favour of France.

By 1965, U.S. gold reserves had fallen below those of the COMMUNITY countries. This drew the attention of U.S. officials to a possible crisis of confidence. This vision had gold at the centre of the global monetary system, because it was a neutral means of exchange for each country. If gold were the basis of the system, its price had to be stable because it was the reference standard that set the price of the currency of each country that would have fixed parities.