Presentation

on Role of Gold and Dollar in

International Trading

Presented to Presented by
P. Department of Anita Rani
Commerce M. Com-I(A)
187525
 International Trading
 International is a combination of two words:
Inter(Outside) +National(Country)
So, international trading means trading with other
countries or outside the nation.
 International trade is the exchange of capital, goods

and services across international borders or territories.

In most countries, it represents a significant share of
gross domestic product(GDP).
Types of international trading
The two types of international trade are:-
 Bilateral Trade: A bilateral trade is the exchange of

goods between two nations promoting trade and

investment. The two countries will reduce tariffs,
import quotas, and trade barriers to encourage trade
and investment.
 Multilateral trade: This is the type of international trade

where a country trade with three or more nations.

Need for International Trading
 No country in the world today is completely self sufficient in the sense
that it posses all facilities for economical production of all goods and
services that are consumed by her people.
 Not even the United nations of America and Russia-the richest nations
in the world-are in such a happy situation and even they depend on
foreign sources of supply for the greater part of their requirements of of
sugar, tea, coffee ,natural Rubber, silk, jute, tin ,nickel and many other
commodities.
 England imports large amount of sugar, tea, wheat, cotton, meat
tobacco, silk, spices, metal alloys and many other goods.
 France imports coal on bulk since her own coal reserves are of inferior
quality.
 Unequal distribution of natural resources.
Benefits of International trading
It helps to achieve economic prosperity in the following
ways:-
 It provides wider market to the local producers.
 It results to proper utilization of resources.
 It helps in attaining the specialization and economies of

scale.
 It leads to increase in the employment.
 Exports helps in earning foreign exchange reserves

from different countries.

 It results in more choices to the Customers.
Drawbacks of International
Trading
 Exhaustion of natural resources of our country.
 It also leads to exploitation on employees.
 Effect on domestic industries.
 Effect on consumption habits.
 Times of Emergency which leads to world wars.
 Over Dependence on other countries.
 Import of harmful Goods
Role of Gold in International
Trading
 Initially, gold was used as a consideration for exchange
of goods between various nations
 The gold standard was put into operation in Britain in

1821.
 Gold coin was full legal tender.
 In it ,gold was freely imported and exported.
 In 1936.Gold standard was completely abandoned,

dueto the scarcity of gold.

 Working of the Gold Standard
 Under gold standard there is automatic adjustment in
the balance of payment of a country as follows:

India France
Favorable BOP Adverse BOP
Inflow of gold Outflow of gold
Expansion of currency Contraction of gold
Rise in prices Decrease in prices
More imports, less exports More exports, less Imports
Deficit balance of payments Favorable Balance of Payments
Gold outflow leading to Gold inflow leading to
contraction expansion of currency
 Bretton Woods Agreement
Each country was undervaluing/devaluing its currency
so as to have competitive edge over others in exports.
This leads to Bretton Woods Conference in 1944.It was
held from the Ist to 22nd of July,1944.It containes 730
delegates from all 44 Allied nations in BrettonWoods
The two new institutions were Emerged from Bretton
Woods were:-
 IMF:- International Monetary Fund
 IBRD:- International Bank for Reconstruction and

Development
International Monetary
Fund(IMF)
 Establishment: 27December,1945
 Started working:1March,1947
 Member Countries : 189

(188,On12 April,2016 Noru also become a member

country of IMF)
 Chairman : Christine Lagarde
 Headquarters : Washington,D.C.(U.S.)
PRESIDENT OF IMF
Objectives of IMF
The objective of The IMF are stated in Article I of the
fund agreements as follows:-
 To promote international monetary cooperation through

a permanent institution which provides machinery for

consultation and collaboration on international
monetary problems.
 To facilitate the expansion of balanced growth of

international trade and to contribute thereby to the

promotion and maintenance of high levels of
employment and real income and to the development of
the productive resources of all members as the primary
objective of the economic policy.
Contd.
 To promote exchange rate stability.
 To establish a multilateral system of payments,
 To make its resources available to its members who are

experiencing BOP problems.

 It grants short term loans to develop the cyclical

disturbance in the economy.

 World Bank
 The World Bank, also known as the International Bank
for Reconstruction and Development(IBRD),was
established as a consequence of the Bretton Woods
conference held in 1944.IBRD was established for
promoting long term investment loans on reasonable
terms. The World Bank is an Governmental
Institution ,the capital stock of it is entirely owned by
the member nations governments. Though initially,
only the nations who were members of IMF could
become the members of IBRD, but subsequently this
restriction was relaxed.
PRESIDENT OF WORLD BANK
 Functions of World Bank
 Provides long term loan for distressed economy and member countries.
 Granting reconstruction loans to war devasted countries.
 Granting developmental loans to underdeveloped countries.
 Providing loans to private concerns for specified projects.
 Providing loans to governments for agriculture, irrigation, power,
transport, water supply, education ,health etc.
 Encouraging industrial development of underdeveloped countries by
promoting economic reforms.
 Promoting foreign investment by guaranteeing loans provided by other
organizations.
 Providing technical, economic and monetary advice to member countries
for specific projects.
 World Bank’s Membership
 At present 189 countries are the member of the World
Bank and is formed on July 1945(73years ago)and
headquarters are set in Washington, US.
 Any country is eligible for membership for IBRD.
 A member can withdraw at any time its membership of

the bank, its withdrawal is, however effective upon

receipt by the Bank of a written notice from the
member to that effect.
 Even when a government ceases to be a member, it is

obliged to repay on demand its portion of the losses ,if

any till the government ceases to be a member.
The World Bank’s Organisation
The Bank’s Structure is organised on a three tier basis.
 1.The Board of Governors:-The board is the supreme governing

authority. The Board is required to meet once every year. The board
decides the following matters;
 New admissions
 Changes in the bank’s stock of capital
 Ways and means of distribution of its net income
 2.The Executive Directors: the board delegates its powers to the

executive directors in the day to day administration. At present, there are

25 executive directors, Out of thes,5 are nominated by five largest
shareholders:USA,UK,Germany,France and India. The rest are elected by
other members.
 3.The President: The executive directors elect a president. he is the chief

operating of the staff of the bank..he is responsible for the ordinary

business of the bank .
World Bank Top Borrowers
 1. Mexico
 2. Brazil
 3. Turkey
 4. Pakistan
 5. China
 6. India
 7 Argentina
RUPEE’S JOURNEY1947-2014
YEAR ECXANGE RATE
INR/USD
1947 1
1975 10.4
1990 17.5
1995 32.4
2000 45
2006 48.3
2008 48.9
2011 55.3
2012 57.2
2013 61.2
2018 69.053
 ABOUT DOLLAR
 United States dollar: It refers to the American dollar, is the official
currency of the United States of America. Sign:$;
Code:USD (also abbreviated US$)
 It is divided into 100 smaller units called Cents.
 It is used as the standard unit of currency in international markets for
commodities such as gold and petroleum.
 It is the currency most used in international transactions.
 It is one of the world’s reserve currencies(is a currency that is held in
significant quantities by many governments and institutions as part of their
foreign exchange reserves).
 Why dollar is considered as
global
Currency?
 After second world war, America was one of the

country which had good economic conditions during

that time. America had gold stock of 25billion dollar.
Therefore dollar was considered as global currency.
Why dollar is Rising?
 Mostly international transactions are settled in dollar
terms, which leads to increase in its demand.
 Due to increase in imports.
 Due to increase in population.
 Mainly, due to agreement between Saudi Arab and

America.
Thank
You