What caused the US balance deficit in the 1960s? What were the cause and effects of the dollar crisis?
Answers:
Inflation led to the deterioration of the U.S. balance payment and trade position by the late 1960s because it made the dollar overvalued, but U.S. wanted to avoid devaluation. The effect was after we ran out of gold we devalued and finally floated the dollar. for details see
http://en.wikipedia.org/wiki/nixon_shock.
As always with economic theory, a combination of; interest rates, currency fluctuations, supply & demand, political stability, market sentiment.
The effects are usually the treasury dept. intervening by buying/selling currency, fiscal policy, backing a currency with gold, interest rate policy, messages from the government giving reasurance about stability.
The answers post by the user, for information only, UKQnA.com does not guarantee the right.