The financial system plays a critical role in the economy. In 1973, the floating exchange rate system, also known as flexible exchange rate system was developed that was market based.Welcome to EconomicsDiscussion.net! An important role in the strengthening of the socialist monetary system is played by the currency monopoly, which ensures economic and political independence and the planned development of the economy of each country and the stability of its monetary system. The aim of new international monetary system is to create a stabilized international currency system and ensure a monetary stability for all the nations.It was decided that since the United States held most of the world’s gold, thus all the nations would determine the values of their currencies in terms of dollar. An important role in the strengthening of the socialist monetary system is played by the currency monopoly, which ensures economic and political independence and the planned development of the economy of each country and the stability of its monetary system. Abandoning these systems as a result of world economic and money-credit crises of 1929-33, the overwhelming majority of countries adopted a monetary system of money and banknote circulation, in which the convertibility of currency notes into real money—gold—is indirect or restricted. It is a governing body that sets rules and regulations by which different nations exchange currencies with each other.With the growing complexity in the international trade and financial market, the international monetary system is necessary to assign a standard value of the international currencies.
Despite the downfall of the colonial system, monetary systems of the colonial type are still not liquidated, and the neocolonialism in the monetary realm is manifested by the establishment of the currency dependence of developing countries on the imperialist powers through currency areas and constraining credits and loans, which lead to the violation and even loss of the monetary sovereignty of these countries.At the time of the general crisis of capitalism, the formerly existing gold standard was abolished. It enables the financial intermediation process which facilitates the flow of funds between savers and borrowers, thus ensuring that financial resources are allocated efficiently towards promoting economic growth … With banknote circulation, the following subtypes of monetary systems are possible: (1) banknotes freely redeemable for gold in bullion (gold-bullion standard); (2) banknotes indirectly redeemable for gold through foreign currencies convertible in gold (gold-exchange standard); (3) banknotes redeemable with limitations for foreign exchange (allowed to all citizens, only to foreigners, only on current items of balance of payment, or different combinations of these conditions—at a single or differentiated rate of exchange); (4) restricted redemption of banknotes and monetary media on current accounts, redeemable in gold only for foreign central banks of issue (such an exchange system existed after World War II until August 1971 only in the USA); and (5) the inconvertibility of money media in the accounts of central and other banks either to gold or to foreign exchange (closed currency).With regard to their role and importance in the capitalist world economy, there are three distinct types of monetary systems: imperialist systems, which play a leading role in currency blocs or areas; colonial and dependent systems; and sovereign systems.
But the gold content of the currencies of some countries (the Democratic Republic of Vietnam, the Korean People’s Democratic Republic) is being established indirectly by fixing the rate of exchange of these currencies in Soviet rubles and US dollars.
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