ABSTRACT
This chapter provides a basis for understanding the meaning of State sovereignty and the national and international monetary obligations of States when they willingly decide to be members of a community of nations. Though fiat money – money with no intrinsic value – gained currency around 1,000 A.D, bullion played a dominant role in the global economy in the nineteenth and twentieth centuries. Maintaining convertibility was a historical problem that went beyond gold availability, current account deficits, and lack of confidence in the global financial system. The Gold-Exchange Standard, which lasted for six years, ended with Britain's suspension of gold convertibility in September 1931. The Bretton Woods system, a par-value system, was a newer Gold-Exchange standard by which the US was to maintain gold reserves and sustain the price of gold at $35 per pound, with assurances of convertibility. The system that was devised at Bretton Woods established the International Monetary Fund.
