Plaza Accord 1985 - Currency Agreement
The Major Currencies are Co-ordinated
"The Plaza Accord was a joint-agreement, signed on 22 September 1985, at the Plaza Hotel in New York City, between France, West Germany, Japan, the United States, and the United Kingdom, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche mark by intervening in currency markets. The U.S. dollar depreciated significantly from the time of the agreement until it was replaced by the Louvre Accord in 1987."
Plaza Accord - Wikipedia
The major currencies represent over 83% global markets - led by the US dollar representing 63% of global markets
The 1985 Plaza Accord between the US, Japan, UK, France, and Germany set the stage for the next 35 years. Notice that these five countries now dominate financial markets and currency markets. It is also worthwhile noting that none of these countries are major commodity producers.
When there is fear in the current monetary system, money flows to the dollar and the reserve currencies, strengthening the reserve currencies, keeping a lid on commodity prices, and reducing
inflation. No wonder these countries can print money without causing inflation (wealth effect). No wonder commodity prices are now at 100-year lows and silver just hit a 5,000 year low versus undervalued gold.
The current monetary system requires a credible kingpin, which has been the US dollar. The massive monetary response to the Corona Virus and dysfunctional US political gridlock have significantly dampened the credibility of the dollar led system.
China's entrance on the world stage threatens to disrupt markets
Since 1985, China has emerged as a economic force. Its economy is now equal to the combined economies of Japan, Germany, UK, and France.
Are the trade negotiations with China a currency deal? And did China reject it? Like tectonic plates, the balance of power is slowly shifting.
We hope that another re-negotiation of the global monetary system - featuring another devaluation of the reserve US dollar - will be orderly.