Bretton Woods Agreement Was Collapsed In Which Year

Bretton Woods Agreement Was Collapsed In Which Year

Although the Bretton Woods conference itself took place over only three weeks, preparations had been under way for several years. The main designers of the Bretton Woods system were the famous British economist John Maynard Keynes and the US Treasury chief economist Harry Dexter White. Keynes` hope was to create a powerful global central bank called the Clearing Union, which issues a new international reserve currency called Bancor. White`s plan called for a smaller credit fund and a larger role for the U.S. dollar rather than creating a new currency. To foster the growth of world trade and the reconstruction of Europe after the war, Bretton Woods planners created another institution, the International Bank for Reconstruction and Development (IBRD), which is one of the five agencies that make up the World Bank Group. and is now perhaps the most important branch [of the World Bank Group]. The IBRD had an authorized capitalization of $10 billion and was expected to lend from its own resources to take out private loans and issue securities to raise new funds to enable a rapid recovery after the war. The IBRD should be a special agency of the United Nations responsible for providing credit for economic development purposes.

Robert Triffin (1960) retained the problems in his famous dilemma. Since the bretton woods parities declared in the 1940s had undervalued the price of gold, gold production would not be sufficient to provide the resources needed to finance the growth of world trade. The deficit would be offset by capital outflows from the United States, which manifest as its balance of payments deficit. He postulated that the stock of U.S. dollar liabilities would increase the likelihood of a conventional bank run if other monetary authorities around the world converted their dollar holdings into gold (Garber, 1993). Triffin said when the turning point came, U.S. monetary authorities would tighten monetary policy, leading to global deflationary pressure. Triffin`s solution was to create a form of global liquidity like Keynes` (1943) Bancor to replace US dollars in international reserves. In order to guarantee economic stability and political peace, States have agreed to cooperate with a view to closely regulating the production of their currencies, in order to maintain fixed exchange rates between countries, with a view to facilitating international trade. This was the basis of the American vision of post-war global free trade, which included reducing tariffs and, among other things, maintaining a trade balance on fixed exchange rates that would be favorable to the capitalist system. As chief international economist at the U.S. Treasury, Harry Dexter White designed in 1942-44 the International Liquidity Access Plan, which competed with Keynes` plan for the British Treasury.

Overall, White`s scheme tended to favor incentives to bring price stability to the world`s economies, while Keynes wanted a system that encouraged economic growth. . . .