[damip]

The Bretton Woods Agreement pegged the dollar to gold ($35 for an ounce of gold). I understand that this can work if the central bank emits $35 for every ounce of gold they store.

But how does that account for destroyed/damaged/lost dollar bills ? The loss is very hard quantify and monitor, but needs to be compensated either through re-printing of new dollars, or through the destruction of stored gold to maintain the desired exchange rate.

Could someone with better knowledge than me explain how this works ?

[burnte]

> Could someone with better knowledge than me explain how this works ?

The short answer is it doesn't. We haven't been on the gold system for a long time, and BW was a sham, no one really did what the agreement said, there wasn't nearly enough gold to do so anyway. Breton Woods was a fictional agreement, basically. But once Nixon stopped pretending, we've been purely a floating currency like most others since.

[testfoobar]

Cash money is replaced at face value if it is damaged - presumably the owner of the cash has an interest in seeing it kept safe.

But unless the Treasury is notified and presented to their satisfaction with damaged bills for replacement, by definition, there is no way of tracking destruction/damage to cash money.

The amount of cash in circulation is tracked: https://www.federalreserve.gov/paymentsystems/coin_currcircv...

In the Euro zone - with negative rates, holding on to paper money can mean a positive return: "German Banks Are Hoarding So Many Euros They Need More Vaults" https://www.bloomberg.com/news/articles/2020-01-31/german-ba...

[boomboomsubban]

The Bretton Woods agreement never had anywhere near enough gold to account for all of the currencies pegged to it. The US held all the gold and agreed to the fixed conversion and everybody else agreed to never convert. It never had to balance presumed destroyed bills with the gold reserve.

[rileymat2]

Do you need to monitor the exact supply or even have any gold on hand or just monitor the (black) market price of gold?

[refurb]

I think you just assume that unless bills are returned to you as damaged and you need to replace them, all the bills printed are in circulation.

And I don't think the peg needs to be exact. If bills are destroyed and the peg becomes 1 dollars = $35.05, things aren't going to fall apart.