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Encyclopedia > Bretton Woods system

The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. For other uses, see Money (disambiguation). ... This article does not cite any references or sources. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... World map indicating Human Development Index (as of 2004). ...


Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944. Combatants Allied powers: China France Great Britain Soviet Union United States and others Axis powers: Germany Italy Japan and others Commanders Chiang Kai-shek Charles de Gaulle Winston Churchill Joseph Stalin Franklin Roosevelt Adolf Hitler Benito Mussolini Hideki Tōjō Casualties Military dead: 17,000,000 Civilian dead: 33,000... This article is about the independent states that comprised the Allies. ... The Mount Washington hotel is situated near Mount Washington, in the town of Carroll. ... Bretton Woods is an area within the town of Carroll, New Hampshire whose principal points of interest are three leisure and recreation facilities. ... Mount Washington Hotel The United Nations Monetary and Financial Conference, commonly known as Bretton Woods conference, was a gathering of 730 delegates from all 45 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire to regulate the international monetary and financial order after the conclusion of...


Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF). These organizations became operational in 1946 after a sufficient number of countries had ratified the agreement. Logo of the World Bank The International Bank for Reconstruction and Development is one of the five institutions consisting the World Bank Group. ... World Bank Group logo The World Bank Group (WBG) is a family of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. ... IMF redirects here. ...


The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Monetary policy is the process by which the government, central bank... GOLD refers to one of the following: GOLD (IEEE) is an IEEE program designed to garner more student members at the university level (Graduates of the Last Decade). ... The balance of payments is a measure of the payments that flow from one exports and imports of goods, services, and financial capital, as well financial transfers. ... Convertibility is the quality of money which is officially backed by government reserves of a precious metal, probably the gold standard. ... USD redirects here. ...


Until the early 1970s, the Bretton Woods system was effective in controlling conflict and in achieving the common goals of the leading states that had created it, especially the United States.

Contents

Origins

The political basis for the Bretton Woods system are in the confluence of several key conditions: the shared experiences of the Great Depression, the concentration of power in a small number of states (further enhanced by the exclusion of a number of important nations because of the war), and the presence of a dominant power willing and able to assume a leadership role in global monetary affairs. For other uses, see The Great Depression (disambiguation). ...


The Great Depression

A high level of agreement among the powerful on the goals and means of international economic management facilitated the decisions reached by the Bretton Woods Conference. The foundation of that agreement was a shared belief in capitalism. Although the developed countries' governments differed somewhat in the type of capitalism they preferred for their national economies (France, for example, preferred greater planning and state intervention, whereas the United States, at one time, favored relatively limited state intervention), all relied primarily on market mechanisms and on private ownership. For other uses, see Capitalism (disambiguation). ...


Thus, it is their similarities rather than their differences that appear most striking. All the participating governments at Bretton Woods agreed that the monetary chaos of the interwar period had yielded several valuable lessons.


The experience of the Great Depression was fresh on the minds of public officials. The planners at Bretton Woods hoped to avoid a repeat of the debacle of the 1930s, when foreign exchange controls undermined the international payments system that was the basis for world trade. The "beggar thy neighbor" policies of 1930s governments—using currency devaluations to increase the competitiveness of a country's export products in order to reduce balance of payments deficits—worsened national deflationary spirals, which resulted in plummeting national incomes, shrinking demand, mass unemployment, and an overall decline in world trade. Trade in the 1930s became largely restricted to currency blocs (groups of nations that use an equivalent currency, such as the "Sterling Area" of the British Empire). These blocs retarded the international flow of capital and foreign investment opportunities. Although this strategy tended to increase government revenues in the short run, it dramatically worsened the situation in the medium and longer run. For other uses, see The Great Depression (disambiguation). ... “Deflation” redirects here. ... Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... CIA figures for world unemployment rates, 2006 Unemployment is the state in which a person is without work, available to work, and is currently seeking work. ... It has been suggested that Commerce be merged into this article or section. ... The sterling area or sterling zone refers to a group of countries, often dominions and colonies of the former British Empire (and Commonwealth), which either use the pound sterling as their currency, or peg their respective currencies to the British pound. ... The British Empire in 1897, marked in pink, the traditional colour for Imperial British dominions on maps. ...


Thus, for the international economy, planners at Bretton Woods all favored a liberal system, one that relied primarily on the market with the minimum of barriers to the flow of private trade and capital. Although they disagreed on the specific implementation of this liberal system, all agreed on an open system. A market economy (also called a free market economy or a free enterprise economy) is an economic system in which the production and distribution of goods and services take place through the mechanism of free markets (though completley useless to some dumbasses) guided by a free price system. ... It has been suggested that Commerce be merged into this article or section. ... Not to be confused with capitol. ...


“Economic security”

Cordell Hull
Cordell Hull

Also based on experience of interwar years, U.S. planners developed a concept of economic security—that a liberal international economic system would enhance the possibilities of postwar peace. One of those who saw such a security link was Cordell Hull, the United States Secretary of State from 1933 to 1944.[1] Hull believed that the fundamental causes of the two world wars lay in economic discrimination and trade warfare. Specifically, he had in mind the trade and exchange controls (bilateral arrangements) of Nazi Germany and the imperial preference system practiced by Britain (by which members or former members of the British Empire were accorded special trade status). Hull argued Cordell Hull, 1924 (public domain from memory. ... Cordell Hull, 1924 (public domain from memory. ... An economic system is a particular set of social institutions which deals with the production, distribution and consumption of goods and services in a particular society. ... Cordell Hull (October 2, 1871–July 23, 1955) was an American politician from the U.S. state of Tennessee. ... Seal of the United States Department of State. ... Nazi Germany, or the Third Reich, commonly refers to Germany in the years 1933–1945, when it was under the firm control of the totalitarian and fascist ideology of the Nazi Party, with the Führer Adolf Hitler as dictator. ...

[U]nhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war…if we could get a freer flow of trade…freer in the sense of fewer discriminations and obstructions…so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance of lasting peace.[2]

The rise of governmental intervention

The developed countries also agreed that the liberal international economic system required governmental intervention. In the aftermath of the Great Depression, public management of the economy had emerged as a primary activity of governments in the developed states. Employment, stability, and growth were now important subjects of public policy. In turn, the role of government in the national economy had become associated with the assumption by the state of the responsibility for assuring of its citizens a degree of economic well-being. The welfare state grew out of the Great Depression, which created a popular demand for governmental intervention in the economy, and out of the theoretical contributions of the Keynesian school of economics, which asserted the need for governmental intervention to maintain an adequate level of employment. For other uses, see The Great Depression (disambiguation). ... There are three main interpretations of the idea of a welfare state: the provision of welfare services by the state. ... For other uses, see The Great Depression (disambiguation). ... The word theory has a number of distinct meanings in different fields of knowledge, depending on their methodologies and the context of discussion. ... Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ... Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ...


At the international level, these ideas evolved from the experience of the 1930s. The priority of national goals, independent national action in the interwar period, and the failure to perceive that those national goals could not be realized without some form of international collaboration resulted in “beggar-thy-neighbor” policies such as high tariffs and competitive devaluations which contributed to economic breakdown, domestic political instability, and international war. The lesson learned was as the principal architect of the Bretton Woods system New Dealer Harry Dexter White put it: Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        For other uses of this word, see tariff (disambiguation). ... The New Deal was the title President Franklin D. Roosevelt gave to the series of programs he initiated between 1933 and 1938 with the goal of providing relief, recovery, and reform (3 Rs) to the people and economy of the United States during the Great Depression. ... Harry Dexter White (left) and John Maynard Keynes (right) at the Bretton Woods Conference Harry Dexter White (October 1892 – August 16, 1948) was an American economist and senior U.S. Treasury department official. ...

the absence of a high degree of economic collaboration among the leading nations will…inevitably result in economic warfare that will be but the prelude and instigator of military warfare on an even vaster scale.[3]

To ensure economic stability and political peace, states agreed to cooperate to regulate the international economic system. The pillar of the U.S. vision of the postwar world was free trade. Free trade involved lowering tariffs and among other things a balance of trade favorable to the capitalist system. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... The balance of trade encompasses the activity of exports and imports, like the work of this cargo ship going through the Panama Canal. ...


Thus, the more developed market economies agreed with the U.S. vision of postwar international economic management, which was to be designed to create and maintain an effective international monetary system and foster the reduction of barriers to trade and capital flows.


The Atlantic Charter

Roosevelt and Churchill during their secret meeting of August 9 – August 12, 1941 in Newfoundland that resulted in the Atlantic Charter, which the U.S. and Britain officially announced two days later.
Roosevelt and Churchill during their secret meeting of August 9August 12, 1941 in Newfoundland that resulted in the Atlantic Charter, which the U.S. and Britain officially announced two days later.

Throughout the war, the United States envisaged a postwar economic order in which the U.S. could penetrate markets that had been previously closed to other currency trading blocs, as well as to expand opportunities for foreign investments for U.S. corporations by removing restrictions on the international flow of capital. Image File history File linksMetadata Atlantic_charter. ... Image File history File linksMetadata Atlantic_charter. ... is the 221st day of the year (222nd in leap years) in the Gregorian calendar. ... is the 224th day of the year (225th in leap years) in the Gregorian calendar. ... For other uses, see 1941 (disambiguation). ...


The Atlantic Charter, drafted during U.S. President Roosevelt's August 1941 meeting with British Prime Minister Winston Churchill on a ship in the North Atlantic, was the most notable precursor to the Bretton Woods Conference. Like Woodrow Wilson before him, whose "Fourteen Points" had outlined U.S. aims in the aftermath of the First World War, Roosevelt set forth a range of ambitious goals for the postwar world even before the U.S. had entered the Second World War. The Atlantic Charter affirmed the right of all nations to equal access to trade and raw materials. Moreover, the charter called for freedom of the seas (a principal U.S. foreign policy aim since France and Britain had first threatened U.S. shipping in the 1790s), the disarmament of aggressors, and the "establishment of a wider and permanent system of general security." Winston Churchills edited copy of the final draft of the Atlantic Charter. ... Churchill redirects here. ... Thomas Woodrow Wilson (December 28, 1856—February 3, 1924), was the twenty-eighth President of the United States. ... United States President Woodrow Wilson listed the Fourteen Points in a speech that he delivered to the United States Congress on January 8, 1918. ... “The Great War ” redirects here. ...


As the war drew to a close, the Bretton Woods conference was the culmination of some two and a half years of planning for postwar reconstruction by the Treasuries of the U.S. and the UK. U.S. representatives studied with their British counterparts the reconstitution of what had been lacking between the two world wars: a system of international payments that would allow trade to be conducted without fear of sudden currency depreciation or wild fluctuations in exchange rates—ailments that had nearly paralyzed world capitalism during the Great Depression. For other uses, see The Great Depression (disambiguation). ...


Without a strong European market for U.S. goods and services, most policymakers believed, the U.S. economy would be unable to sustain the prosperity it had achieved during the war. In addition, U.S. unions had only grudgingly accepted government-imposed restraints on their demand during the war, but they were willing to wait no longer, particularly as inflation cut into the existing wage scales with painful force. (By the end of 1945, there had already been major strikes in the automobile, electrical, and steel industries.) A union (labor union in American English; trade union, sometimes trades union, in British English; either labour union or trade union in Canadian English) is a group of workers who act collectively to address common issues. ... Car redirects here. ... For other uses, see Steel (disambiguation). ...


In early 1945 Bernard Baruch described the spirit of Bretton Woods as: if we can "stop subsidization of labor and sweated competition in the export markets," as well as prevent rebuilding of war machines, "oh boy, oh boy, what long term prosperity we will have."[4] The United States would therefore use its position of influence to reopen and control the world economy, so as to give unhindered access to all nations' markets and materials. Bernard Baruch, 1920 Bernard Mannes Baruch (August 19, 1870–June 20, 1965) was an American financier, stock market speculator, statesman, and presidential adviser. ...


Wartime devastation of Europe and East Asia

Furthermore, U.S. allies—economically exhausted by the war—accepted this leadership. They needed U.S. assistance to rebuild their domestic production and to finance their international trade; indeed, they needed it to survive.


Before the war, the French and the British were realizing that they could no longer compete with U.S. industry in an open marketplace. During the 1930s, the British had created their own economic bloc to shut out U.S. goods. Churchill did not believe that he could surrender that protection after the war, so he watered down the Atlantic Charter's "free access" clause before agreeing to it. A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy...


Yet, the U.S. officials were determined to open their access to the British empire. The combined value of British and U.S. trade was well over half of all the world's trade in goods. In order for the US to open global markets, it first had to split the British (trade) empire. Whilst Britain had economically dominated the 19th century, they intended the second half of the 20th to be under U.S. hegemony.[citation needed] Hegemony (pronounced [])[1] (Greek: ) is a concept that has been used to describe the existence of dominance of one social group over another, such that the ruling group -- referred to as a hegemon -- acquires some degree of consent from the subordinate, as opposed to dominance purely by force. ...


A devastated Britain had little choice. Two world wars had destroyed the country's principal industries that paid for the importation of half the nation's food and nearly all its raw materials except coal. The British had no choice but to ask for aid. In 1945, the U.S. agreed to a loan of $3.8 billion. In return, British officials promised to negotiate the agreement.[citation needed] One thousand million (1,000,000,000) is the natural number following 999,999,999 and preceding 1,000,000,001. ...


For nearly two centuries, French and U.S. interests had clashed in both the Old World and the New World. During the war, French mistrust of the United States was embodied by General Charles de Gaulle, president of the French provisional government. De Gaulle bitterly fought U.S. officials as he tried to maintain his country's colonies and diplomatic freedom of action. In turn, U.S. officials saw de Gaulle as a political extremist. The Old World consists of those parts of Earth known to Europeans, Asians, and Africans before the voyages of Christopher Columbus; it includes Europe, Asia, and Africa (collectively known as Africa-Eurasia), plus surrounding islands. ... Frontispiece of Peter Martyr dAnghieras De orbe novo (On the New World). Carte dAmérique, Guillaume Delisle, 1722. ... For other uses, see Charles de Gaulle (disambiguation). ... Extremism is the act of taking a belief, political view or ideology to its most literal extreme. ...


But in 1945 de Gaulle— at that point the leading voice of French nationalism—was forced to grudgingly ask the U.S. for a billion-dollar loan. Most of the request was granted; in return France promised to curtail government subsidies and currency manipulation that had given its exporters advantages in the world market. Eugène Delacroixs Liberty Leading the People, symbolising French nationalism during the July Revolution 1830. ...


On a far more profound level, as the Bretton Woods conference was convening, the greater part of the Third World remained politically and economically subordinate. Linked to the developed countries of the West economically and politically—formally and informally—these states had little choice but to acquiesce to the international economic system established for them. In the East, Soviet hegemony in Eastern Europe provided the foundation for a separate international economic system. For the Jamaican reggae band, see Third World (band). ... CCCP redirects here. ... Statistical regions of Europe as delineated by the United Nations (UN definition of Eastern Europe marked red):  Northern Europe  Western Europe  Eastern Europe  Southern Europe Pre-1989 division between the West (grey) and Eastern Bloc (orange) superimposed on current borders: Russia (dark orange), other countries formerly part of the USSR...


Design

Free trade relied on the free convertibility of currencies. Negotiators at the Bretton Woods conference, fresh from what they perceived as a disastrous experience with floating rates in the 1930s, concluded that major monetary fluctuations could stall the free flow of trade. Convertibility is the quality of money which is officially backed by government reserves of a precious metal, probably the gold standard. ...


The liberal economic system required an accepted vehicle for investment, trade, and payments. Unlike national economies, however, the international economy lacks a central government that can issue currency and manage its use. In the past this problem had been solved through the gold standard, but the architects of Bretton Woods did not consider this option feasible for the postwar political economy. Instead, they set up a system of fixed exchange rates managed by a series of newly created international institutions using the U.S. dollar (which was a gold standard currency for central banks) as a reserve currency. An economic system is a particular set of social institutions which deals with the production, distribution and consumption of goods and services in a particular society. ... Central government or the national government (or, in federal states, the federal government) is the government at the level of the nation-state. ... For other uses, see Gold standard (disambiguation). ... A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. ... Percentage of global currencies A reserve currency (or anchor currency) is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. ...


Informal

Previous regimes

In the 19th and early 20th centuries gold played a key role in international monetary transactions. The gold standard was used to back currencies; the international value of currency was determined by its fixed relationship to gold; gold was used to settle international accounts. The gold standard maintained fixed exchange rates that were seen as desirable because they reduced the risk of trading with other countries. For other uses, see Gold standard (disambiguation). ...


Imbalances in international trade were theoretically rectified automatically by the gold standard. A country with a deficit would have depleted gold reserves and would thus have to reduce its money supply. The resulting fall in demand would reduce imports and the lowering of prices would boost exports; thus the deficit would be rectified. Any country experiencing inflation would lose gold and therefore would have a decrease in the amount of money available to spend. This decrease in the amount of money would act to reduce the inflationary pressure. Supplementing the use of gold in this period was the British pound. Based on the dominant British economy, the pound became a reserve, transaction, and intervention currency. But the pound was not up to the challenge of serving as the primary world currency, given the weakness of the British economy after the Second World War. A budget deficit occurs when an entity (often a government) spends more money than it takes in. ... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... For the concept in cosmology, see cosmic inflation. ... For details of notes and coins, see British coinage and British banknotes. ...


The architects of Bretton Woods had conceived of a system wherein exchange rate stability was a prime goal. Yet, in an era of more activist economic policy, governments did not seriously consider permanently fixed rates on the model of the classical gold standard of the nineteenth century. Gold production was not even sufficient to meet the demands of growing international trade and investment. And a sizable share of the world's known gold reserves were located in the Soviet Union, which would later emerge as a Cold War rival to the United States and Western Europe. For other uses, see Cold War (disambiguation). ... A current understanding of Western Europe. ...


The only currency strong enough to meet the rising demands for international liquidity was the US dollar. The strength of the US economy, the fixed relationship of the dollar to gold ($35 an ounce), and the commitment of the U.S. government to convert dollars into gold at that price made the dollar as good as gold. In fact, the dollar was even better than gold: it earned interest and it was more flexible than gold. The United States dollar is the official currency of the United States. ...


The Bretton Woods system of fixed exchange rates

The Bretton Woods system sought to secure the advantages of the gold standard without its disadvantages. Thus, a compromise was sought between the polar alternatives of either freely floating or irrevocably fixed rates—an arrangement that might gain the advantages of both without suffering the disadvantages of either while retaining the right to revise currency values on occasion as circumstances warranted.


The rules of Bretton Woods, set forth in the articles of agreement of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), provided for a system of fixed exchange rates. The rules further sought to encourage an open system by committing members to the convertibility of their respective currencies into other currencies and to free trade. IMF redirects here. ... Logo of the World Bank The International Bank for Reconstruction and Development is one of the five institutions consisting the World Bank Group. ...


What emerged was the "pegged rate" currency regime. Members were required to establish a parity of their national currencies in terms of gold (a "peg") and to maintain exchange rates within plus or minus 1% of parity (a "band") by intervening in their foreign exchange markets (that is, buying or selling foreign money). A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency (most often the US Dollar), to a basket of other currencies, or to another measure of value...


In practice, however, since the principal "Reserve currency" would be the U.S. dollar, this meant that other countries would peg their currencies to the U.S. dollar, and—once convertibility was restored—would buy and sell U.S. dollars to keep market exchange rates within plus or minus 1% of parity. Thus, the U.S. dollar took over the role that gold had played under the gold standard in the international financial system. The Global Financial System refers to those financial institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. ...


Meanwhile, in order to bolster faith in the dollar, the U.S. agreed separately to link the dollar to gold at the rate of $35 per ounce of gold. At this rate, foreign governments and central banks were able to exchange dollars for gold. Bretton Woods established a system of payments based on the dollar, in which all currencies were defined in relation to the dollar, itself convertible into gold, and above all, "as good as gold." The U.S. currency was now effectively the world currency, the standard to which every other currency was pegged. As the world's key currency, most international transactions were denominated in dollars.


The U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold. Additionally, all European nations that had been involved in World War II were highly in debt and transferred large amounts of gold into the United States, a fact that contributed to the supremacy of the United States. Thus, the U.S. dollar was strongly appreciated in the rest of the world and therefore became the key currency of the Bretton Woods system. Purchasing Power- the amount of value of a good/services compared to the amount paid. ...


Member countries could only change their par value with IMF approval, which was contingent on IMF determination that its balance of payments was in a "fundamental disequilibrium." Par value has several meanings depending on the context, whether used in the equities market, or in the bond markets, and partially also dependent on where in the world the par value term is used. ...


Formal regimes

The Bretton Woods Conference led to the establishment of the IMF and the IBRD (now the World Bank), which still remain powerful forces in the world economy. The World Bank logo The World Bank (the Bank) is a part of the World Bank Group (WBG), is a bank that makes loans to developing countries for development programs with the stated goal of reducing poverty. ...


As mentioned, a major point of common ground at the Conference was the goal to avoid a recurrence of the closed markets and economic warfare that had characterized the 1930s. Thus, negotiators at Bretton Woods also agreed that there was a need for an institutional forum for international cooperation on monetary matters. Already in 1944 the British economist John Maynard Keynes emphasized "the importance of rule-based regimes to stabilize business expectations"—something he accepted in the Bretton Woods system of fixed exchange rates. Currency troubles in the interwar years, it was felt, had been greatly exacerbated by the absence of any established procedure or machinery for intergovernmental consultation. Keynes redirects here. ...


As a result of the establishment of agreed upon structures and rules of international economic interaction, conflict over economic issues was minimized, and the significance of the economic aspect of international relations seemed to recede.


The International Monetary Fund

Officially established on December 27, 1945, when the 29 participating countries at the conference of Bretton Woods signed its Articles of Agreement, the IMF was to be the keeper of the rules and the main instrument of public international management. The Fund commenced its financial operations on March 1, 1947. IMF approval was necessary for any change in exchange rates in excess of 10%. It advised countries on policies affecting the monetary system. December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 60th day of the year (61st in leap years) in the Gregorian calendar. ... Year 1947 (MCMXLVII) was a common year starting on Wednesday (link will display full 1947 calendar) of the Gregorian calendar. ...


Designing the IMF

The big question at the Bretton Woods conference with respect to the institution that would emerge as the IMF was the issue of future access to international liquidity and whether that source should be akin to a world central bank able to create new reserves at will or a more limited borrowing mechanism. Market liquidity is a business or economics term that refers to the ability to quickly buy or sell a particular item without causing a significant movement in the price. ...

John Maynard Keynes (right) and Harry Dexter White at the Bretton Woods Conference
John Maynard Keynes (right) and Harry Dexter White at the Bretton Woods Conference

Although attended by 44 nations, discussions at the conference were dominated by two rival plans developed by the U.S. and Britain. As the chief international economist at the U.S. Treasury in 1942–44, Harry Dexter White drafted the U.S. blueprint for international access to liquidity, which competed with the plan drafted for the British Treasury by Keynes. Overall, White's scheme tended to favor incentives designed to create price stability within the world's economies, while Keynes' wanted a system that encouraged economic growth. Download high resolution version (500x630, 95 KB) This work is copyrighted. ... Download high resolution version (500x630, 95 KB) This work is copyrighted. ... Keynes redirects here. ... Harry Dexter White (left) and John Maynard Keynes (right) at the Bretton Woods Conference Harry Dexter White (October 1892 – August 16, 1948) was an American economist and senior U.S. Treasury department official. ...


At the time, gaps between the White and Keynes plans seemed enormous. Outlining the difficulty of creating a system that every nation could accept in his speech at the closing plenary session of the Bretton Woods conference on July 22, 1944, Keynes stated: is the 203rd day of the year (204th in leap years) in the Gregorian calendar. ... Year 1944 (MCMXLIV) was a leap year starting on Saturday (link will display full calendar) of the Gregorian calendar. ...

We, the delegates of this Conference, Mr. President, have been trying to accomplish something very difficult to accomplish.[...] It has been our task to find a common measure, a common standard, a common rule acceptable to each and not irksome to any.[5]

Keynes' proposals would have established a world reserve currency (which he thought might be called "bancor") administered by a central bank vested with the possibility of creating money and with the authority to take actions on a much larger scale (understandable considering deflationary problems in Britain at the time). Percentage of global currencies A reserve currency (or anchor currency) is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. ... An international currency that was proposed by Keynes but never implemented. ...


In case of balance of payments imbalances, Keynes recommended that both debtors and creditors should change their policies. As outlined by Keynes, countries with payment surpluses should increase their imports from the deficit countries and thereby create a foreign trade equilibrium. Thus, Keynes was sensitive to the problem that placing too much of the burden on the deficit country would be deflationary.


But the U.S., as a likely creditor nation, and eager to take on the role of the world's economic powerhouse, balked at Keynes' plan and did not pay serious attention to it. The U.S. contingent was too concerned about inflationary pressures in the postwar economy, and White saw an imbalance as a problem only of the deficit country. For the concept in cosmology, see cosmic inflation. ...


Although compromise was reached on some points, because of the overwhelming economic and military power of the U.S., the participants at Bretton Woods largely agreed on White's plan. As a result, the IMF was born with an economic approach and political ideology that stressed controlling inflation and introducing austerity plans over fighting poverty. This would influence its approach to Third World countries struggling with underdevelopment. Political Ideologies Part of the Politics series Politics Portal This box:      An ideology is an organized collection of ideas. ... A boy from an East Cipinang trash dump slum in Jakarta, Indonesia shows what he found. ... Underdevelopment is the state of an organism or of an organisation (e. ...


Subscriptions and quotas

What emerged largely reflected U.S. preferences: a system of subscriptions and quotas embedded in the IMF, which itself was to be no more than a fixed pool of national currencies and gold subscribed by each country as opposed to a world central bank capable of creating money. The Fund was charged with managing various nations' trade deficits so that they would not produce currency devaluations that would trigger a decline in imports. Look up quota in Wiktionary, the free dictionary. ... Devaluation is a reduction in the value of a currency with respect to other monetary units. ...


The IMF was provided with a fund, composed of contributions of member countries in gold and their own currencies. The original quotas planned were to total $8.8 billion. When joining the IMF, members were assigned "quotas" reflecting their relative economic power, and, as a sort of credit deposit, were obliged to pay a "subscription" of an amount commensurate to the quota. The subscription was to be paid 25% in gold or currency convertible into gold (effectively the dollar, which was the only currency then still directly gold convertible for central banks) and 75% in the member's own currency. A quota is a prescribed number or share of something. ...


Quota subscriptions were to form the largest source of money at the IMF's disposal. The IMF set out to use this money to grant loans to member countries with financial difficulties. Each member was then entitled to withdraw 25% of its quota immediately in case of payment problems. If this sum was insufficient, each nation in the system was also able to request loans for foreign currency.


Financing trade deficits

In the event of a deficit in the current account, Fund members, when short of reserves, would be able to borrow foreign currency in amounts determined by the size of its quota. In other words, the higher the country's contribution was, the higher the sum of money it could borrow from the IMF. Blue = countries in current account surplus; Red = countries in current account deficit, 2005 The current account of the balance of payments is the sum of the balance of trade (exports less imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as...


Members were required to pay back debts within a period of 18 months to five years. In turn, the IMF embarked on setting up rules and procedures to keep a country from going too deeply into debt, year after year. The Fund would exercise "surveillance" over other economies for the U.S. Treasury, in return for its loans to prop up national currencies. The United States Department of the Treasury is a Cabinet department, a treasury, of the United States government established by an Act of U.S. Congress in 1789 to manage the revenue of the United States government. ...


IMF loans were not comparable to loans issued by a conventional credit institution. Instead, it was effectively a chance to purchase a foreign currency with gold or the member's national currency.


The U.S.-backed IMF plan sought to end restrictions on the transfer of goods and services from one country to another, eliminate currency blocs and lift currency exchange controls.


The IMF was designed to advance credits to countries with balance of payments deficits. Short-run balance of payment difficulties would be overcome by IMF loans, which would facilitate stable currency exchange rates. This flexibility meant that member states would not have to induce a depression automatically in order to cut its national income down to such a low level that its imports will finally fall within its means. Thus, countries were to be spared the need to resort to the classical medicine of deflating themselves into drastic unemployment when faced with chronic balance of payments deficits. Before the Second World War, European nations often resorted to this, particularly Britain. WORLD OF WARCRAFT IS THE BEST GAME EVER INVENTED AND PLAY IT. IF YOU DONT PLAY WORLD OF WARCRAFT, YOU ARE A nOOb. ... CIA figures for world unemployment rates, 2006 Unemployment is the state in which a person is without work, available to work, and is currently seeking work. ...


Moreover, the planners at Bretton Woods hoped that this would reduce the temptation of cash-poor nations to reduce capital outflow by restricting imports. In effect, the IMF extended Keynesian measures—government intervention to prop up demand and avoid recession—to protect the U.S. and the stronger economies from disruptions of international trade and growth.[citation needed]


Changing the par value

The IMF sought to provide for occasional discontinuous exchange-rate adjustments (changing a member's par value) by international agreement. Member nations were permitted first to depreciate (or appreciate in opposite situations) their currencies by 10%. This tends to restore equilibrium in its trade by expanding its exports and contracting imports. This would be allowed only if there was what was called a "fundamental disequilibrium." A decrease in the value of the country's money was called a "devaluation" while an increase in the value of the country's money was called a "revaluation". Revaluation- means rise of a price of goods or products. ...


It was envisioned that these changes in exchange rates would be quite rare. Regrettably the notion of fundamental disequilibrium, though key to the operation of the par value system, was never spelled out in any detail—an omission that would eventually come back to haunt the regime in later years.


IMF operations

Never before had international monetary cooperation been attempted on a permanent institutional basis. Even more groundbreaking was the decision to allocate voting rights among governments not on a one-state, one-vote basis but rather in proportion to quotas. Since the U.S. was contributing the most, U.S. leadership was the key implication. Under the system of weighted voting the U.S. was able to exert a preponderant influence on the IMF. The U.S. held one-third of all IMF quotas at the outset, enough to veto all changes to the IMF Charter on its own.


In addition, the IMF was based in Washington, D.C., staffed mainly by U.S. economists. It regularly exchanged personnel with the U.S. Treasury. When the IMF began operations in 1946, President Harry S. Truman named White as its first U.S. Executive Director. Since no Deputy Managing Director post had yet been created, White served occasionally as Acting Managing Director and generally played a highly influential role during the IMF's first year. For other persons named Harry Truman, see Harry Truman (disambiguation). ...


The International Bank for Reconstruction and Development

No provision was made for international creation of reserves. New gold production was assumed to be sufficient. In the event of structural disequilibria, it was expected that there would be national solutions—a change in the value of the currency or an improvement by other means of a country's competitive position. Few means were given to the IMF, however, to encourage such national solutions. Logo of the World Bank The International Bank for Reconstruction and Development is one of the five institutions consisting the World Bank Group. ...


It had been recognized in 1944 that the new system could come into being only after a return to normalcy following the disruption of World War II. It was expected that after a brief transition period — expected to be no more than five years — the international economy would recover and the system would enter into operation.


To promote the growth of world trade and to finance the postwar reconstruction of Europe, the planners at Bretton Woods created another institution, the International Bank for Reconstruction and Development (IBRD) — now the most important agency of the World Bank Group. The IBRD had an authorized capitalization of $10 billion and was expected to make loans of its own funds to underwrite private loans and to issue securities to raise new funds to make possible a speedy postwar recovery. The IBRD was to be a specialized agency of the United Nations charged with making loans for economic development purposes. World Bank Group logo The World Bank Group (WBG) is a family of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and eliminating poverty. ... Capitalization (or capitalisation) is writing a word with its first letter as a majuscule (upper case letter) and the remaining letters in minuscules (lower case letters), in those writing systems which have a case distinction. ...


Readjusting the Bretton Woods system

The dollar shortages and the Marshall Plan

The Bretton Wood arrangements were largely adhered to and ratified by the participating governments. It was expected that national monetary reserves, supplemented with necessary IMF credits, would finance any temporary balance of payments disequilibria. But this did not however prove sufficient to get Europe out of the doldrums. The balance of payments is a measure of the payments that flow from one exports and imports of goods, services, and financial capital, as well financial transfers. ...


Postwar world capitalism suffered from a huge dollar shortage. The United States was running huge balance of trade surpluses, and the U.S. reserves were immense and growing. It was necessary to reverse this flow. Dollars had to leave the United States and become available for international use. In other words, the United States would have to reverse the natural economic processes and run a balance of payments deficit.


The modest credit facilities of the IMF were clearly insufficient to deal with Western Europe's huge balance of payments deficits. The problem was further aggravated by the reaffirmation by the IMF Board of Governors in the provision in the Bretton Woods Articles of Agreement that the IMF could make loans only for current account deficits and not for capital and reconstruction purposes. Only the United States contribution of $570 million was actually available for IBRD lending. In addition, because the only available market for IBRD bonds was the conservative Wall Street banking market, the IBRD was forced to adopt a conservative lending policy, granting loans only when repayment was assured. Given these problems, by 1947 the IMF and the IBRD themselves were admitting that they could not deal with the international monetary system's economic problems.[6] Elaborate marble facade of NYSE as seen from the intersection of Broad and Wall Streets For other uses, see Wall Street (disambiguation). ...


Thus, the much looser Marshall Plan—the European Recovery Program—was set up to provide U.S. finance to rebuild Europe largely through grants rather than loans. The Marshall Plan was the program of massive economic aid given by the United States to favored countries in Western Europe for the rebuilding of capitalism. In a speech at Harvard University on June 5, 1946, U.S. Secretary of State George Marshall stated: Map of Cold-War era Europe and the Near East showing countries that received Marshall Plan aid. ... Harvard redirects here. ... is the 156th day of the year (157th in leap years) in the Gregorian calendar. ... Year 1946 (MCMXLVI) was a common year starting on Tuesday (link will display full 1946 calendar) of the Gregorian calendar. ... For other persons named George Marshall, see George Marshall (disambiguation). ...

The breakdown of the business structure of Europe during the war was complete. …Europe's requirements for the next three or four years of foreign food and other essential products… principally from the United States… are so much greater than her present ability to pay that she must have substantial help or face economic, social and political deterioration of a very grave character.[7]

From 1947 until 1958, the U.S. deliberately encouraged an outflow of dollars, and, from 1950 on, the United States ran a balance of payments deficit with the intent of providing liquidity for the international economy. Dollars flowed out through various U.S. aid programs: the Truman Doctrine entailing aid to the pro-U.S. Greek and Turkish regimes, which were struggling to suppress socialist revolution, aid to various pro-U.S. regimes in the Third World, and most important, the Marshall Plan. From 1948 to 1954 the United States gave 16 Western European countries $17 billion in grants. The Truman Doctrine was a proclamation by U.S. president Harry S. Truman on March 12, 1947. ...


To encourage long-term adjustment, the United States promoted European and Japanese trade competitiveness. Policies for economic controls on the defeated former Axis countries were scrapped. Aid to Europe and Japan was designed to rebuild productive and export capacity. In the long run it was expected that such European and Japanese recovery would benefit the United States by widening markets for U.S. exports, and providing locations for U.S. capital expansion. This article is about the independent states that comprised the Axis powers. ...


In 1956, the World Bank created the International Finance Corporation and in 1960 it created the International Development Association (IDA). Both have been controversial. Critics of the IDA argue that it was designed to head off a broader based system headed by the United Nations, and that the IDA lends without consideration for the effectiveness of the program. Critics also point out that the pressure to keep developing economies "open" has led to their having difficulties obtaining funds through ordinary channels, and a continual cycle of asset buy up by foreign investors and capital flight by locals. Defenders of the IDA pointed to its ability to make large loans for agricultural programs which aided the "Green Revolution" of the 1960s, and its functioning to stabilize and occasionally ubsidize Third World governments, particularly in Latin America. The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve peoples lives. ... The International Development Association (IDA) created on September 24, 1960, is the part of the World Bank that helps the world’s poorest countries. ... Seen in Asian markets in the 1990s capital flight is when assets and/or money rapidly flow out of a country. ... The Green Revolution was the worldwide transformation of agriculture that led to significant increases in agricultural production between the 1940s and 1960s. ...


Bretton Woods, then, created a system of triangular trade: the United States would use the convertible financial system to trade at a tremendous profit with developing nations, expanding industry and acquiring raw materials. It would use this surplus to send dollars to Europe, which would then be used to rebuild their economies, and make the United States the market for their products. This would allow the other industrialized nations to purchase products from the Third World, which reinforced the American role as the guarantor of stability. When this triangle became destabilized, Bretton Woods entered a period of crisis which led ultimately to its collapse.


Bretton Woods and the Cold War

In 1945, Roosevelt and Churchill prepared the postwar era by negotiating with Joseph Stalin at Yalta about respective zones of influence; this same year U.S. and Soviet troops divided Germany into occupation zones and confronted one another in Korea. Josef Vissarionovich Dzhugashvili (Georgian: , Ioseb Besarionis Dze Jughashvili; Russian: , Iosif Vissarionovich Dzhugashvili) (December 18 [O.S. December 6] 1878[1] – March 5, 1953), better known by his adopted name, Joseph Stalin (alternatively transliterated Josef Stalin), was General Secretary of the Communist Party of the Soviet Unions Central Committee from... Yalta (Ukrainian: , Russian: , Crimean Tatar: ) is a city in Crimea, southern Ukraine, on the north coast of the Black Sea. ... This article is about the Korean civilization. ...


Harry Dexter White succeeded in getting the Soviet Union to participate in the Bretton Woods conference in 1944, but his goal was frustrated when the Soviet Union would not join the IMF. In the past, the reasons why the Soviet Union chose not to subscribe to the articles by December 1945 have been the subject of speculation. But since the release of relevant Soviet archives, it is now clear that the Soviet calculation was based on the behavior of the parties that had actually expressed their assent to the Bretton Woods Agreements. The extended debates about ratification that had taken place both in the UK and the U.S. were read in Moscow as evidence of the quick disintegration of the wartime alliance. Harry Dexter White (left) and John Maynard Keynes (right) at the Bretton Woods Conference Harry Dexter White (October 1892 – August 16, 1948) was an American economist and senior U.S. Treasury department official. ... For other uses, see Moscow (disambiguation). ...


Facing the Soviet Union, whose power had also strengthened and whose territorial influence had expanded, the U.S. assumed the role of leader of the capitalist camp. The rise of the postwar U.S. as the world's leading industrial, monetary, and military power was rooted in the fact that the mainland U.S. was untouched by the war, in the instability of the national states in postwar Europe, and the wartime devastation of the Soviet economy.


Despite the economic effort imposed by such a policy, being at the center of the international market gave the U.S. unprecedented freedom of action in pursuing its foreign affairs goals. A trade surplus made it easier to keep armies abroad and to invest outside the U.S. Because other nations could not sustain foreign deployments, U.S. power to decide why, when and how to intervene in global crisis increased. The dollar continued to function as a compass to guide the health of the world economy, and exporting to the U.S. became the primary economic goal of developing or redeveloping economies. This arrangement came to be referred to as the Pax Americana, in analogy to the Pax Britannica of the late 19th century and the Pax Romana of the first. (See Globalism) Pax Americana (Latin: American Peace) is a term to describe the period of relative peace in the Western world since the end of World War II in 1945, coinciding with the dominant military and economic position of the United States. ... Pax Britannica (Latin for the British Peace, modelled after Pax Romana) refers to a period of British imperialism after the 1805 Battle of Trafalgar, which led to a period of overseas British expansionism. ... Roman Empire at its greatest extent with the conquests of Trajan Pax Romana, Latin for the Roman peace (sometimes Pax Augusta), was the long period of relative peace and minimal expansion by military force experienced by the Roman Empire between 27 BC and 180 AD. Augustus Caesar led Rome into... With regards to globalism , it would be constructive perhaps to know and recall some of the history. ...


The late Bretton Woods System

The U.S. balance of payments crisis (1958–68)

After the end of World War II, the U.S. held $26 billion in gold reserves, of an estimated total of $40 billion (approx 65%). As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percent. In 1958, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed, but not acted on. However, with a mounting recession that began in 1959, this response alone was not sustainable. In 1960, with Kennedy's election, a decade-long effort to maintain the Bretton Woods System at the $35/ounce price was begun. Dwight David Eisenhower, born David Dwight Eisenhower (October 14, 1890 – March 28, 1969), nicknamed Ike, was a five-star General in the United States Army and U.S. politician, who served as the thirty-fourth President of the United States (1953–1961). ... John Kennedy and JFK redirect here. ...


The design of the Bretton Woods System was that only nations could enforce gold convertibility on the anchor currency—the United States’ dollar. Gold convertibility enforcement was not required, but instead, allowed. Nations could forgo converting dollars to gold, and instead hold dollars. Rather than full convertibility, it provided a fixed price for sales between central banks. However, there was still an open gold market, 80% of which was traded through London, which issued a morning "gold fix," which was the price of gold on the open market. For the Bretton Woods system to remain workable, it would either have to alter the peg of the dollar to gold, or it would have to maintain the free market price for gold near the $35 per ounce official price. The greater the gap between free market gold prices and central bank gold prices, the greater the temptation to deal with internal economic issues by buying gold at the Bretton Woods price and selling it on the open market.


However, keeping the dollar because of its ability to earn interest was still more desirable than holding gold. In 1960 Robert Triffin noticed that the reason holding dollars was more valuable than gold was because constant U.S. balance of payments deficits helped to keep the system liquid and fuel economic growth. What would be later known as Triffin's Dilemma was predicted when Triffin noted that if the U.S. failed to keep running deficits the system would lose its liquidity, not being able to keep up with the world's economic growth, thus bringing the system to a halt. Yet, continuing to incur such payment deficits also meant that over time the deficits would erode confidence in the dollar as the reserve currency creating instability.[8] Robert Triffin (October 5, 1911; Flobecq, Belgium – February 23, 1993; Ostend, Belgium) was a Belgian economist best known for his critique of the Bretton Woods system later known as the Triffins Dilemma. ... The balance of payments is a measure of the payments that flow from one exports and imports of goods, services, and financial capital, as well financial transfers. ... Belgian economist Robert Triffin had first identified the problem of fundamental imbalances in the Bretton Woods system in 1960. ...


The first effort was the creation of the "London Gold Pool." The theory of the pool was that spikes in the free market price of gold, set by the "morning gold fix" in London, could be controlled by having a pool of gold to sell on the open market, which would then be recovered when the price of gold dropped. Gold's price spiked in response to events such as the Cuban Missile Crisis, and other smaller events, to as high as $40/ounce. The Kennedy administration began drafting a radical change of the tax system in order to spur more productive capacity, and thus encourage exports. This would culminate with his tax cut program of 1963, designed to maintain the $35 peg. President Kennedy in a crowded Cabinet Room during the Cuban Missile Crisis. ...


In 1967 there was an attack on the pound, and a run on gold in the "sterling area," and on November 17, 1967, the British government was forced to devalue the pound. U.S. President Lyndon Baines Johnson was faced with a brutal choice, either he could institute protectionist measures, including travel taxes, export subsidies and slashing the budget—or he could accept the risk of a "run on gold" and the dollar. From Johnson's perspective: "The world supply of gold is insufficient to make the present system workable—particularly as the use of the dollar as a reserve currency is essential to create the required international liquidity to sustain world trade and growth." He believed that the priorities of the United States were correct, and that, while there were internal tensions in the Western alliance, that turning away from open trade would be more costly, economically and politically, than it was worth: "Our role of world leadership in a political and military sense is the only reason for our current embarrassment in an economic sense on the one hand and on the other the correction of the economic embarrassment under present monetary systems will result in an untenable position economically for our allies." The sterling area or sterling zone refers to a group of countries, often dominions and colonies of the former British Empire (and Commonwealth), which either use the pound sterling as their currency, or peg their respective currencies to the British pound. ... 17 November is also the name of a Marxist group in Greece, coinciding with the anniversary of the Athens Polytechnic uprising. ... Year 1967 (MCMLXVII) was a common year starting on Sunday (link will display full calendar) of the 1967 Gregorian calendar. ... Lyndon Baines Johnson ( August 27, 1908 – January 22, 1973), often referred to as LBJ, was an American politician. ...


While West Germany agreed not to purchase gold from the U.S., and agreed to hold dollars instead, the pressure on both the Dollar and the Pound Sterling continued. In January 1968 Johnson imposed a series of measures designed to end gold outflow, and to increase U.S. exports. However, to no avail: on March 17, 1968, there was a run on gold, the London Gold Pool was dissolved, and a series of meetings began to rescue or reform the existing system. But, as long as the U.S. commitments to foreign deployment continued, particularly to Western Europe, there was little that could be done to maintain the gold peg. is the 76th day of the year (77th in leap years) in the Gregorian calendar. ... Year 1968 (MCMLXVIII) was a leap year starting on Monday (link will display full calendar) of the Gregorian calendar. ...


The attempt to maintain the peg collapsed in November 1968, and a new policy program was attempted: to convert Bretton Woods to a system where the enforcement mechanism floated by some means, which would be set by either fiat, or by a restriction to honor foreign accounts.


Structural changes underpinning the decline of international monetary management

Return to convertibility

In the 1960s and 70s, important structural changes eventually led to the breakdown of international monetary management. One change was the development of a high level of monetary interdependence. The stage was set for monetary interdependence by the return to convertibility of the Western European currencies at the end of 1958 and of the Japanese yen in 1964. Convertibility facilitated the vast expansion of international financial transactions, which deepened monetary interdependence. Convertibility is the quality of money which is officially backed by government reserves of a precious metal, probably the gold standard. ... Japanese 10 yen coin (obverse) showing Phoenix Hall of Byodoin Yen is the currency used in Japan. ...


The growth of international currency markets

Another aspect of the internationalization of banking has been the emergence of international banking consortia. Since 1964 various banks had formed international syndicates, and by 1971 over three quarters of the world's largest banks had become shareholders in such syndicates. Multinational banks can and do make huge international transfers of capital not only for investment purposes but also for hedging and speculating against exchange rate fluctuations. It has been suggested that this article or section be merged into Hedge (finance). ... Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ...


These new forms of monetary interdependence made possible huge capital flows. During the Bretton Woods era countries were reluctant to alter exchange rates formally even in cases of structural disequilibria. Because such changes had a direct impact on certain domestic economic groups, they came to be seen as political risks for leaders. As a result official exchange rates often became unrealistic in market terms, providing a virtually risk-free temptation for speculators. They could move from a weak to a strong currency hoping to reap profits when a revaluation occurred. If, however, monetary authorities managed to avoid revaluation, they could return to other currencies with no loss. The combination of risk-free speculation with the availability of huge sums was highly destabilizing.


The decline of U.S. monetary influence

A second structural change that undermined monetary management was the decline of U.S. hegemony. The U.S. was no longer the dominant economic power it had been for more than two decades. By the mid-1960s, the E.E.C. and Japan had become international economic powers in their own right. With total reserves exceeding those of the U.S., with higher levels of growth and trade, and with per capita income approaching that of the U.S., Europe and Japan were narrowing the gap between themselves and the United States. The European Community (EC) was originally founded on March 25, 1957 by the signing of the Treaty of Rome under the name of European Economic Community. ... The per capita income for a group of people may be defined as their total personal income, divided by the total population. ...


The shift toward a more pluralistic distribution of economic power led to increasing dissatisfaction with the privileged role of the U.S. dollar as the international currency. As in effect the world's central banker, the U.S., through its deficit, determined the level of international liquidity. In an increasingly interdependent world, U.S. policy greatly influenced economic conditions in Europe and Japan. In addition, as long as other countries were willing to hold dollars, the U.S. could carry out massive foreign expenditures for political purposes—military activities and foreign aid—without the threat of balance-of-payments constraints. In the social sciences, pluralism is a framework of interaction in which groups show sufficient respect and tolerance of each other, that they fruitfully coexist and interact without conflict or assimilation. ... Market liquidity is a business or economics term that refers to the ability to quickly buy or sell a particular item without causing a significant movement in the price. ...


Dissatisfaction with the political implications of the dollar system was increased by détente between the U.S. and the Soviet Union. The Soviet threat had been an important force in cementing the Western capitalist monetary system. The U.S. political and security umbrella helped make American economic domination palatable for Europe and Japan, which had been economically exhausted by the war. As gross domestic production grew in European countries, trade grew. When common security tensions lessened, this loosened the transatlantic dependence on defense concerns, and allowed latent economic tensions to surface. Détente is a French term, meaning a relaxing or easing; the term has been used in international politics since the early 1970s. ...


The decline of the dollar

Reinforcing the relative decline in U.S. power and the dissatisfaction of Europe and Japan with the system was the continuing decline of the dollar—the foundation that had underpinned the post-1945 global trading system. The Vietnam War and the refusal of the administration of U.S. President Lyndon B. Johnson to pay for it and its Great Society programs through taxation resulted in an increased dollar outflow to pay for the military expenditures and rampant inflation, which led to the deterioration of the U.S. balance of trade position.[citation needed] In the late 1960s, the dollar was overvalued with its current trading position, while the Deutsche Mark and the yen were undervalued; and, naturally, the Germans and the Japanese had no desire to revalue and thereby make their exports more expensive, whereas the U.S. sought to maintain its international credibility by avoiding devaluation. Meanwhile, the pressure on government reserves was intensified by the new international currency markets, with their vast pools of speculative capital moving around in search of quick profits.[citations needed] Combatants Republic of Vietnam United States Republic of Korea Thailand Australia New Zealand The Philippines National Front for the Liberation of South Vietnam Democratic Republic of Vietnam People’s Republic of China Democratic Peoples Republic of Korea Strength US 1,000,000 South Korea 300,000 Australia 48,000... For the pop band, see Presidents of the United States of America. ... LBJ redirects here. ... The Great Society was also a 1960s band featuring Grace Slick, and a 1914 book by English social theorist Graham Wallas. ... The balance of trade encompasses the activity of exports and imports, like the work of this cargo ship going through the Panama Canal. ... The Deutsche Mark (DM, DEM) was the official currency of West and, from 1990, unified Germany. ...


In contrast, upon the creation of Bretton Woods, with the U.S. producing half of the world's manufactured goods and holding half its reserves, the twin burdens of international management and the Cold War were possible to meet at first. Throughout the 1950s Washington sustained a balance of payments deficit in order to finance loans, aid, and troops for allied regimes. But during the 1960s the costs of doing so became less tolerable. By 1970 the U.S. held under 16% of international reserves. Adjustment to these changed realities was impeded by the U.S. commitment to fixed exchange rates and by the U.S. obligation to convert dollars into gold on demand.[citations needed] For other uses, see Cold War (disambiguation). ...


The paralysis of international monetary management

"Floating" Bretton Woods (1968–72)

By 1968, the attempt to defend the dollar at a fixed peg of $35/ounce, the policy of the Eisenhower, Kennedy and Johnson administrations, had become increasingly untenable. Gold outflows from the U.S. accelerated, and despite gaining assurances from Germany and other nations to hold gold, the profligate fiscal spending of the Johnson administration had transformed the "dollar shortage" of the 1940s and 1950s into a dollar glut by the 1960s. In 1967, the IMF agreed in Rio de Janeiro to replace the tranche division set up in 1946. Special Drawing Rights were set as equal to one U.S. dollar, but were not usable for transactions other than between banks and the IMF. Nations were required to accept holding SDRs equal to three times their allotment, and interest would be charged, or credited, to each nation based on their SDR holding. The original interest rate was 1.5%. Economics slang incinuating that the amount of currency units printed or distributed within a countrys economic system has exceeded the amount of assets (usually gold) needed to protect the currency units universally redemptive value. ... This article is about the Brazilian city. ... In structured finance, the word tranche (sometimes traunche) refers to one of several related securitized bonds offered as part of the same deal. ... Special Drawing Rights (SDRs) is a potential claim on the freely usable currencies of International Monetary Fund members. ...


The intent of the SDR system was to prevent nations from buying pegged dollars and selling them at the higher free market price, and give nations a reason to hold dollars by crediting interest, at the same time setting a clear limit to the amount of dollars which could be held. The essential conflict was that the American role as military defender of the capitalist world's economic system was recognized, but not given a specific monetary value. In effect, other nations "purchased" American defense policy by taking a loss in holding dollars. They were only willing to do this as long as they supported U.S. military policy, because of the Vietnam war and other unpopular actions, the pro-U.S. consensus began to evaporate. The SDR agreement, in effect, monetized the value of this relationship, but did not create a market for it. Combatants Republic of Vietnam United States Republic of Korea Thailand Australia New Zealand The Philippines National Front for the Liberation of South Vietnam Democratic Republic of Vietnam People’s Republic of China Democratic Peoples Republic of Korea Strength US 1,000,000 South Korea 300,000 Australia 48,000...


The use of SDRs as "paper gold" seemed to offer a way to balance the system, turning the IMF, rather than the U.S., into the world's central banker. The US tightened controls over foreign investment and currency, including mandatory investment controls in 1968. In 1970, U.S. President Richard Nixon lifted import quotas on oil in an attempt to reduce energy costs; instead, however, this exacerbated dollar flight, and created pressure from petro-dollars now linked to gas-euros resulting the 1963 energy transition from coal to gas with the creation of the Dutch Gasunie. Still, the U.S. continued to draw down reserves. In 1971 it had a reserve deficit of $56 Billion dollars; as well, it had depleted most of its non-gold reserves and had only 22% gold coverage of foreign reserves. In short, the dollar was tremendously overvalued with respect to gold. Nixon redirects here. ... A petrodollar is a dollar earned by a country through the sale of oil. ... N.V. Nederlandse Gasunie is a Dutch natural gas infrastructure and transportation company. ...


The "Nixon Shock"

Main article: Nixon Shock

By the early 1970s, as the Vietnam War accelerated inflation, the United States as a whole began running a trade deficit (for the first time in the twentieth century). The crucial turning point was 1970, which saw U.S. gold coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists, represented the point where holders of the dollar had lost faith in the ability of the U.S. to cut budget and trade deficits. The term Nixon Shock is used to refer to two different policy measures taken by U.S. President Richard Nixon in 1971 and 1972. ... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ...


In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to pay for government expenditure on the military and social programs. In the first six months of 1971, assets for $22 billion fled the U.S. In response, on August 15, 1971, Nixon unilaterally imposed 90-day wage and price controls, a 10% import surcharge, and most importantly "closed the gold window," making the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was made without consulting members of the international monetary system or even his own State Department, and was soon dubbed the "Nixon Shock". is the 227th day of the year (228th in leap years) in the Gregorian calendar. ... Year 1971 (MCMLXXI) was a common year starting on Friday (link will display full calendar) of the 1971 Gregorian calendar, known as the year of cyclohexanol. ... The term Nixon Shock is used to refer to two different policy measures taken by U.S. President Richard Nixon in 1971 and 1972. ...


The surcharge was dropped in December 1971 as part of a general revaluation of major currencies, which were henceforth allowed 2.25% devaluations from the agreed exchange rate. But even the more flexible official rates could not be defended against the speculators. By March 1976, all the major currencies were floating—in other words, exchange rates were no longer the principal method used by governments to administer monetary policy.


The Smithsonian Agreement

Main article: Smithsonian Agreement

The shock of August 15 was followed by efforts under U.S. leadership to develop a new system of international monetary management. Throughout the fall of 1971, there was a series of multilateral and bilateral negotiations of the Group of Ten seeking to develop a new multilateral monetary system. The Smithsonian Agreement was a December 1971 agreement that ended the fixed exchange rates established at the Bretton Woods Conference of 1944. ... is the 227th day of the year (228th in leap years) in the Gregorian calendar. ... G10 countries. ...


On 17 and 18 December 1971, the Group of Ten, meeting in the Smithsonian Institution in Washington, created the Smithsonian Agreement which devalued the dollar to $38/ounce, with 2.25% trading bands, and attempted to balance the world financial system using SDRs alone. It was criticized at the time, and was by design a "temporary" agreement. It failed to impose discipline on the U.S. government, and with no other credibility mechanism in place, the pressure against the dollar in gold continued. is the 352nd day of the year (353rd in leap years) in the Gregorian calendar. ... Year 1971 (MCMLXXI) was a common year starting on Friday (link will display full calendar) of the 1971 Gregorian calendar, known as the year of cyclohexanol. ... The Smithsonian Institution Building or Castle on the National Mall serves as the Institutions headquarters. ... The Smithsonian Agreement was a December 1971 agreement that ended the fixed exchange rates established at the Bretton Woods Conference of 1944. ...


This resulted in gold becoming a floating asset, and in 1971 it reached $44.20/ounce, in 1972 $70.30/ounce and still climbing. By 1972, currencies began abandoning even this devalued peg against the dollar, though it took a decade for all of the industrialized nations to do so. In February 1973 the Bretton Woods currency exchange markets closed, after a last-gasp devaluation of the dollar to $44/ounce, and reopened in March in a floating currency regime. A floating currency is a currency that uses a floating exchange rate as its exchange rate regime. ...


Bretton Woods II?

A number of economists (e.g. Doole, Folkerts-Landau and Garber) have referred to the system of currency relations which evolved after 2001, in which currencies, particularly the Chinese renminbi (yuan), remained fixed to the US Dollar as Bretton Woods II. The argument is that a system of pegged currencies is both stable and desirable, a notion that causes considerable controversy. ISO 4217 Code CNY User(s) Mainland of the Peoples Republic of China Inflation 1. ... The United States dollar is the official currency of the United States. ...


"Bretton Woods II", unlike its predecessor, is not codified and does not represent any kind of a multilateral agreement. It contains the following key elements:

  • The United States imports considerable amounts of goods, particularly from East Asian export-oriented economies such as China, Japan and various other Southeast-Asian countries.
  • Since China and Japan don't have much demand for U.S.-produced goods, United States runs large trade deficits with both countries.
  • Under normal circumstances, trade deficits would correct themselves through depreciation of the dollar and appreciation of the yen and the renminbi. However, Chinese and Japanese governments are interested in keeping their currencies low with respect to the dollar to keep their products competitive. To achieve that, they are forced to buy large quantities of U.S. treasury securities with freshly-printed money.
  • Similar mechanisms work in the Eurozone with the euro and its satellite currency (Swiss franc). The Eurozone is somewhat less coupled to the U.S. economy, so the euro has been allowed to appreciate considerably with respect to the dollar.

The Eurozone (also called Euro Area, Eurosystem or Euroland) refers to the European Union member states that have adopted the euro currency union. ... For other uses, see Euro (disambiguation). ... ISO 4217 Code CHF User(s) Switzerland, Liechtenstein, Campione dItalia Inflation 1. ...

Academic legacy

The collapse of Bretton Woods would lead to the study in economics of credibility as a separate field, and to the prominence of "open" macroeconomic models, such as the Mundell-Fleming model. The Mundell-Fleming model is an economic model first set forth by Robert Mundell and Marcus Fleming. ...


Pegged rates

Dates shown are those on which the rate was introduced


Pound sterling

Date Value of US dollar
in pounds
27 December 1945 4.03
18 September 1949 2.8
17 November 1967 2.4

GBP redirects here. ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 261st day of the year (262nd in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... 17 November is also the name of a Marxist group in Greece, coinciding with the anniversary of the Athens Polytechnic uprising. ... Year 1967 (MCMLXVII) was a common year starting on Sunday (link will display full calendar) of the 1967 Gregorian calendar. ...

French Franc

Date Value of US dollar
in francs
Note
27 December 1945 119.11 £1 = 480 FRF
26 January 1948 214.39 £1 = 864 FRF
18 October 1948 263.52 £1 = 1062 FRF
27 April 1949 272.21 £1 = 1097 FRF
20 September 1949 350 £1 = 980 FRF
10 August 1957 420 £1 = 1176 FRF
27 December 1958 493.71 1 FRF = 1.8 mg gold
1 January 1960 4.9371 1 new franc = 100 old francs
10 August 1968 5.48 1 new franc = 162 mg gold

ISO 4217 Code FRF User(s) Monaco, Andorra, France except New Caledonia, French Polynesia, and Wallis and Futuna ERM Since 13 March 1979 Fixed rate since 31 December 1998 Replaced by €, non cash 1 January 1999 Replaced by €, cash 1 January 2002 € = 6. ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 26th day of the year in the Gregorian calendar. ... Year 1948 (MCMXLVIII) was a leap year starting on Thursday (link will display the 1948 calendar) of the Gregorian calendar. ... is the 291st day of the year (292nd in leap years) in the Gregorian calendar. ... Year 1948 (MCMXLVIII) was a leap year starting on Thursday (link will display the 1948 calendar) of the Gregorian calendar. ... is the 117th day of the year (118th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 263rd day of the year (264th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 222nd day of the year (223rd in leap years) in the Gregorian calendar. ... Year 1957 (MCMLVII) was a common year starting on Tuesday (link displays the 1957 Gregorian calendar). ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Jan. ... is the 1st day of the year in the Gregorian calendar. ... Year 1960 (MCMLX) was a leap year starting on Friday (link will display full calendar) of the Gregorian calendar. ... is the 222nd day of the year (223rd in leap years) in the Gregorian calendar. ... Year 1968 (MCMLXVIII) was a leap year starting on Monday (link will display full calendar) of the Gregorian calendar. ...

Deutsche Mark

Date Value of US dollar
in marks
21 June 1948 3.33
18 September 1949 4.20
6 March 1961 4
29 October 1969 3.67

The Deutsche Mark (DM, DEM) was the official currency of West and, from 1990, unified Germany. ... is the 172nd day of the year (173rd in leap years) in the Gregorian calendar. ... Year 1948 (MCMXLVIII) was a leap year starting on Thursday (link will display the 1948 calendar) of the Gregorian calendar. ... is the 261st day of the year (262nd in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 65th day of the year (66th in leap years) in the Gregorian calendar. ... Year 1961 (MCMLXI) was a common year starting on Sunday (link will display full calendar) of the Gregorian calendar. ... is the 302nd day of the year (303rd in leap years) in the Gregorian calendar. ... Also: 1969 (number) 1969 (movie) 1969 (Stargate SG-1) episode. ...

Italian lira

Date Value of US dollar
in lire
January 4, 1946 225
March 26, 1946 509
January 7, 1947 350
November 28, 1947 575
18 September 1949 625

ISO 4217 Code ITL User(s) Italy, San Marino, Vatican City, but not Campione dItalia Inflation 2. ... is the 4th day of the year in the Gregorian calendar. ... Year 1946 (MCMXLVI) was a common year starting on Tuesday (link will display full 1946 calendar) of the Gregorian calendar. ... March 26 is the 85th day of the year (86th in leap years) in the Gregorian calendar. ... Year 1946 (MCMXLVI) was a common year starting on Tuesday (link will display full 1946 calendar) of the Gregorian calendar. ... is the 7th day of the year in the Gregorian calendar. ... Year 1947 (MCMXLVII) was a common year starting on Wednesday (link will display full 1947 calendar) of the Gregorian calendar. ... is the 332nd day of the year (333rd in leap years) in the Gregorian calendar. ... Year 1947 (MCMXLVII) was a common year starting on Wednesday (link will display full 1947 calendar) of the Gregorian calendar. ... is the 261st day of the year (262nd in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ...

Japanese yen

Date Value of US dollar
in yen
25 April 1949 360

ISO 4217 Code JPY User(s) Japan Inflation -0. ... is the 115th day of the year (116th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ...

Swiss franc

Date Value of US dollar
in francs
Note
27 December 1945 4.30521 £1 = 17.35 CHF
September 1949 4.375 £1 = 12.25 CHF

ISO 4217 Code CHF User(s) Switzerland, Liechtenstein, Campione dItalia Inflation 1. ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ...

Dutch gulden

Date Value of US dollar
in gulden
27 December 1945 2.652
20 September 1949 3.8
7 March 1961 3.62

ISO 4217 Code NLG User(s) The Netherlands Inflation 2. ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 263rd day of the year (264th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 66th day of the year (67th in leap years) in the Gregorian calendar. ... Year 1961 (MCMLXI) was a common year starting on Sunday (link will display full calendar) of the Gregorian calendar. ...

Belgian franc

Date Value of US dollar
in francs
27 December 1945 43.77
1946 43.8725
21 September 1949 50

ISO 4217 Code BEF User(s) Belgium, Luxembourg ERM Since 13 March 1979 Fixed rate since 31 December 1998 Replaced by €, non cash 1 January 1999 Replaced by €, cash 1 January 2002 € = 40. ... December 27 is the 361st day of the year in the Gregorian calendar (362nd in leap years). ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 264th day of the year (265th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ...

Finnish markka

Date Value of US dollar
in markkaa
Note
October 17, 1945 136
July 5, 1949 160
September 19, 1949 230
September 15, 1957 320
January 1, 1963 3.2 1 new markka = 100 old markkaa
October 12, 1967 4.2

The markka or mark was the currency used in Finland from 1861 until January 1, 1999, when it was replaced by the euro (€). The currency code used for the markka was FIM, and the usual familiar notation was a postfix mk. ... is the 290th day of the year (291st in leap years) in the Gregorian calendar. ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 186th day of the year (187th in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 262nd day of the year (263rd in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 258th day of the year (259th in leap years) in the Gregorian calendar. ... Year 1957 (MCMLVII) was a common year starting on Tuesday (link displays the 1957 Gregorian calendar). ... is the 1st day of the year in the Gregorian calendar. ... For other uses, see 1963 (disambiguation). ... is the 285th day of the year (286th in leap years) in the Gregorian calendar. ... Year 1967 (MCMLXVII) was a common year starting on Sunday (link will display full calendar) of the 1967 Gregorian calendar. ...

Greek drachma

Date Value of US dollar
in drachmae
1954 30

ISO 4217 Code GRD User(s) Greece Inflation 3. ...

Danish krone

Date Value of US dollar
in krone
Note
August 1945 4.8
September 19, 1949 6.91 Devalued in line with sterling
November 21, 1967 7.5

ISO 4217 Code DKK User(s) Denmark, Greenland, Faroe Islands 1 Inflation 1. ... is the 262nd day of the year (263rd in leap years) in the Gregorian calendar. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... is the 325th day of the year (326th in leap years) in the Gregorian calendar. ... Year 1967 (MCMLXVII) was a common year starting on Sunday (link will display full calendar) of the 1967 Gregorian calendar. ...

Spanish peseta

Date Value of US dollar
in pesetas
Note
July 17, 1959 60
November 20, 1967 70 Devalued in line with sterling

ISO 4217 Code ESP User(s) Spain, Andorra Inflation 1. ... is the 198th day of the year (199th in leap years) in the Gregorian calendar. ... Year 1959 (MCMLIX) was a common year starting on Thursday (link will display full calendar) of the Gregorian calendar. ... is the 324th day of the year (325th in leap years) in the Gregorian calendar. ... Year 1967 (MCMLXVII) was a common year starting on Sunday (link will display full calendar) of the 1967 Gregorian calendar. ...

See also

International trade - an overview Absolute advantage Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) APEC Autarky Balance of trade barter Bilateral Investment Treaty (BIT) Bimetallism branch plant Bretton Woods Conference Bretton Woods system British timber trade Cash crop Comparative advantage Continental trading bloc Cost, insurance and freight Currency... Wikipedia does not have an article with this exact name. ... The balance of trade encompasses the activity of exports and imports, like the work of this cargo ship going through the Panama Canal. ... The balance of payments is a measure of the payments that flow from one exports and imports of goods, services, and financial capital, as well financial transfers. ... A floating currency is a currency that uses a floating exchange rate as its exchange rate regime. ... The General Agreement on Tariffs and Trade (typically abbreviated GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATTs main objective was the reduction of barriers to international trade. ... The Global Financial System refers to those financial institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. ... Puxi side of Shanghai, China. ... Reserves of foreign exchange and gold in 2006 A pile of 12. ... For other uses, see Gold standard (disambiguation). ... Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits held by central banks and monetary authorities. ... IMF redirects here. ... Please wikify (format) this article as suggested in the Guide to layout and the Manual of Style. ... For the school of international relations, see Neoliberalism in international relations. ... Pax Americana (Latin: American Peace) is a term to describe the period of relative peace in the Western world since the end of World War II in 1945, coinciding with the dominant military and economic position of the United States. ... Belgian economist Robert Triffin had first identified the problem of fundamental imbalances in the Bretton Woods system in 1960. ... The Washington Consensus is a phrase initially coined in 1987-88 by John Williamson to describe a relatively specific set of ten economic policy prescriptions that he considered to constitute a standard reform package promoted for crisis-wracked countries by Washington-based institutions such as the International Monetary Fund, World... The World Bank logo The World Bank (the Bank) is a part of the World Bank Group (WBG), is a bank that makes loans to developing countries for development programs with the stated goal of reducing poverty. ... Mount Washington Hotel The United Nations Monetary and Financial Conference, commonly known as Bretton Woods conference, was a gathering of 730 delegates from all 45 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire to regulate the international monetary and financial order after the conclusion of... Logo of the World Bank The International Bank for Reconstruction and Development is one of the five institutions consisting the World Bank Group. ...

Notes and references

  1. ^ For discussions of how liberal ideas motivated U.S. foreign economic policy after World War II, see, e.g., Kenneth Waltz, Man, the State and War (New York: Columbia University Press, 1969) and David P. Calleo and Benjamin M. Rowland, American and World Political Economy (Bloomington, Indiana: Indiana University Press, 1973).
  2. ^ Hull, Cordell (1948). The Memoirs of Cordell Hull: vol. 1. New York: Macmillan, 81. 
  3. ^ Quoted in Robert A. Pollard, Economic Security and the Origins of the Cold War, 1945-1950 (New York: Columbia University Press, 1985), p.8.
  4. ^ Baruch to E. Coblentz, March 23, 1945, Papers of Bernard Baruch, Princeton University Library, Princeton, N.J quoted in Walter LaFeber, America, Russia, and the Cold War (New York, 2002), p.12.
  5. ^ Comments by John Maynard Keynes in his speech at the closing plenary session of the Bretton Woods Conference on July 22, 1944 in Donald Moggeridge (ed.), The Collected Writings of John Maynard Keynes (London: Cambridge University Press, 1980), vol. 26, p. 101. This comment also can be found quoted online at [1]
  6. ^ Mason, Edward S.; Asher, Robert E. (1973). The World Bank Since Bretton Woods. Washington, D.C.: The Brookings Institution, 105-107, 124-135. 
  7. ^ Comments by U.S. Secretary of State George Marshall in his June 1947 speech "Against Hunger, Poverty, Desperation and Chaos" at a Harvard University commencement ceremony. A full transcript of his speech can be read online at [2]
  8. ^ [3]

is the 82nd day of the year (83rd in leap years) in the Gregorian calendar. ... Year 1945 (MCMXLV) was a common year starting on Monday (link will display the full calendar). ... is the 203rd day of the year (204th in leap years) in the Gregorian calendar. ... Year 1944 (MCMXLIV) was a leap year starting on Saturday (link will display full calendar) of the Gregorian calendar. ...

External links

Benjamin Cohen is Louis G. Lancaster Professor of International Political Economy at the University of California, Santa Barbara. ... Empire of Debt is a book written by Bill Bonner and Addison Wiggin, subtitled The Rise of an Epic Financial Crisis. The main subject of the book is the United Statess alleged transformation from republic to empire, although it also discusses such varied themes as the wisdom of the... This is a list of central banks. ... BIS Headquarters in Basel The Bank for International Settlements (or BIS) is an international organization of central banks which exists to foster cooperation among central banks and other agencies in pursuit of monetary and financial stability. It carries out its work through subcommittees, the secretariats it hosts, and through its... The Fed redirects here. ... Headquarters Coordinates , , Established 1 January 1998 President Jean-Claude Trichet Central Bank of Austria, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia, Spain Currency Euro ISO 4217 Code EUR Reserves €43bn directly, €338bn through the Eurosystem (including gold deposits). ... The Bank of Japan has its headquarters in this building in Tokyo. ... Headquarters Coordinates , , Governor Mervyn King Central Bank of United Kingdom Currency Pound sterling ISO 4217 Code GBP Base borrowing rate 5. ... For the defunct commercial bank, see Bank of Canada (commercial). ... The Reserve Bank of Australia came into being on 14 January 1960 to operate as Australias central bank and banknote issuing authority. ... Headquarters Senior Executive Sergei Ignatiev Central Bank of Russian Federation Currency Russian ruble ISO 4217 Code RUB Base borrowing rate 10. ... It has been suggested that Türkiye Cumhuriyeti Merkez Bankası be merged into this article or section. ... The Croatian National Bank (or HNB for Croatian Hrvatska Narodna Banka) is the central bank of the Republic of Croatia. ... National bank of Serbia (NBS) was founded in 1884. ... The Peoples Bank of China (PBC) (Simplified Chinese: 中国人民银行; Traditional Chinese: 中國人民銀行; pinyin: Zhōngguó Rénmín Yínháng ) (not to be confused with the Bank of China or the Central Bank of China) is the central bank of the Peoples Republic of China with the power to... The RBI headquarters in Mumbai The RBI Regional Office in Mumbai The RBI heaquarters in Delhi. ... Bank of Korea is the national central bank of the Republic of Korea (South Korea). ... Bank Negara Malaysia (BNM) is the Malaysian central bank. ... The Central Bank is depicted on the 100-peso bill. ... The Bank of Thailand (ธนาคารแห่งประเทศไทย) is the central bank of the Thailand. ... The Brazilian Central Bank (in Portuguese: Banco Central do Brasil) is Brazils highest monetary authority in and the countrys governing body in finances and economics. ... The Central Bank of Chile (Spanish: ) is the central bank of Chile. ... The Banco de México (Spanish: Bank of Mexico), abbreviated BdeM or Banxico, is Mexicos central bank. ... Headquarters Jerusalem, Israel Governor Stanley Fischer Central Bank of Israel Currency New Israeli Shekel ISO 4217 Code ILS Base borrowing rate 3. ... Bank Markazi, Tehran, Iran Bank Markazi Iran or Bank Markazi Jomhouri Islami Iran (Persian: بانک مرکزی جمهوری اسلامی ايران) is the Central bank of Iran. ... The Central Bank of Iraq, guarded by U.S. troops. ... This article is in need of improvement. ... Reserve Bank of Zimbabwe is that southern African countrys central bank. ... Expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. ... Contractionary monetary policy is monetary policy that seeks to reduce the size of the money supply. ... // When money is deposited in a bank it can then be lent out to another person. ... The Monetary policy of Sweden is decided by Sveriges Riksbank, the central bank of Sweden. ... The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital. ... Open Market Operations are the means by which central banks control the liquidity of the national currency. ... This article lacks information on the importance of the subject matter. ... The discount window is an instrument of monetary policy (usually controlled by central banks) that allows eligible institutions to borrow money, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions. ... Money creation is the process by which money is produced or issued. ... An interest rate is the rental price of money. ... The World Bank logo The World Bank (the Bank) is a part of the World Bank Group (WBG), is a bank that makes loans to developing countries for development programs with the stated goal of reducing poverty. ... Logo of the World Bank The International Bank for Reconstruction and Development is one of the five institutions consisting the World Bank Group. ... The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve peoples lives. ... The International Development Association (IDA) created on September 24, 1960, is the part of the World Bank that helps the world’s poorest countries. ... The Multilateral Investment Guarantee Agency (MIGA) is a member of the World Bank group. ... The International Centre for Settlement of Investment Disputes (ICSID), an institution of the World Bank group, was founded in 1966 under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. ...

  Results from FactBites:
 
Bretton Woods system - Wikipedia, the free encyclopedia (9453 words)
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold; and the ability of the IMF to bridge temporary imbalances of payments.
The political bases for the Bretton Woods system are in the confluence of several key conditions: the shared experiences of the Great Depression, the concentration of power in a small number of states, and the presence of a dominant power willing and able to assume a leadership role in global monetary affairs.
The big question at the Bretton Woods conference with respect to the institution that would emerge as the IMF was the issue of future access to international liquidity and whether that source should be akin to a world central bank able to create new reserves at will or a more limited borrowing mechanism.
NationMaster - Encyclopedia: Bretton Woods system (1001 words)
Bretton Woods is an area within the town of Carroll, New Hampshire whose principal points of interest are three leisure and recreation facilities.
The chief features of the Bretton Woods system were, first, an obligation for each country to maintain the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold; and, secondly, the provision by the IMF of finance to bridge temporary payments imbalances.
The political bases for the Bretton Woods system are to be found in the confluence of several key conditions: the shared experiences of the Great Depression, the concentration of power in a small number of states, and the presence of a dominant power willing and able to assume a leadership role.
  More results at FactBites »

 
 

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