Word: dollarization
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Dates: during 2000-2009
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Since the end of World War II, the U.S. dollar has enjoyed a unique and powerful position in international trade. But perhaps no more...
...effort to free international trade and fund postwar reconstruction, the member states agreed to fix their exchange rates by tying their currencies to the U.S. dollar. American politicians, meanwhile, assured the rest of the world that its currency was dependable by linking the U.S. dollar to gold; $1 equaled 35 oz. of bullion. Nations also agreed to buy and sell U.S. dollars to keep their currencies within 1% of the fixed rate. And thus the golden age of the U.S. dollar began...
...Bretton Woods system itself collapsed in 1971, when President Richard Nixon severed the link between the dollar and gold - a decision made to prevent a run on Fort Knox, which contained only a third of the gold bullion necessary to cover the amount of dollars in foreign hands. By 1973, most major world economies had allowed their currencies to float freely against the dollar. It was a rocky transition, characterized by plummeting stock prices, skyrocketing oil prices, bank failures and inflation...
...South Korea's government announced it would guarantee external borrowing by Korean banks through June up to a total of $100 billion and to inject a further $30 billion into financial markets. The steps are aimed at alleviating growing difficulties Korean banks have faced getting U.S. dollar financing from skittish international banks. Korea's move followed the lead of other Asian governments. Last week, Hong Kong, Singapore and Malaysia guaranteed all bank deposits, part of a larger effort to rebuild confidence in financial markets. A half dozen Asian central banks, including China's, have cut interest rates in recent weeks...
...South Korean banks was cheered by market analysts. Goldman Sachs noted in a report that the package - which totals some 13% of Korea's GDP - will "go a long way toward stabilizing the jittery financial markets in Korea." Fitch Ratings added that "these measures will ensure sufficient U.S. dollar liquidity to the banking system and real economy." Investors responded positively, but cautiously. The benchmark Kospi stock market index rose 2.3% on Monday, while the won gained 1.4% against the dollar...