[alexamenos]

With a caveat that my facts concerning international currency are always questionable....

Back in the day, exchange rates were fairly constant for good reason -- a "Dollar" was not money per se, nor was "Pound Sterling" or a "Yen"....these terms all signified fixed amounts of gold or silver--a "dollar" literally meant exchangeable for a fixed weight of gold, and hence the exchange rates between currencies were whatever got you the same amount of gold....the money was gold and silver, the manner in which money traded hands was through promisary notes called "dollars" and "yen", etc...

The big-dog governments didn't like this arrangement because every time they pissed away large sums of money or fought costly wars they had to go directly to their peeps for more money, and the peeps never were happy about this and this threatened big dogs.

so naturally and inevitably...along comes Nixon and he says 'screw all this, you aren't getting any gold for a dollar'. Now all "dollar" means is green piece of paper -- a "dollar" ceases to mean a certain weight of gold (redeemable from Ft. Knox), and came to mean "a green piece of paper which says in god we trust, because we sure as hell can't trust the people who manage the money supply".

but I digress...if can't get any gold for the dollar, then I sure as hell ain't going to exchange yens or pounds sterlings or anything else that is redeemable in gold for something that isn't, hence other currencies were gradually de-coupled from gold and silver....

So....what we've got now is about a 40 year old international economic system where Country A trades worthless pieces of paper to Country B for worthless pieces of paper, the perceived value of these worthless pieces of paper backed only by the trustiworthiness of bankers meeting in secret.

Amazingly this system is starting to break down. Who'd of thunk it?

Historically, 40 years is a pretty good run for a fiat currency, so the surprise isn't so much that it's breaking down as that it has lasted this long. If you stop and think about a little US history, the Federal Reserve Note is actually the 3rd fiat currency we've had in a couple of hundred years...the Continental being the first and the Confederate dollar being the second (ok, so not all of us had the Confederate dollar, but the point is the same)....both of these met swift ends, unsurprisingly.