Bretton Woods Essay

Bretton timberland Conference The Background During the creative activity warf ar I and populace War II the international monetary carcass is ruin into several competing currency blocs, the fierce lot war between the global ceding back and nation. In the post- human beings War II, at the completion of humanness War II, the U. S. one dollar bill has enjoyed a unique and force-outful position in international craftsmanship and in any case because British and American governments for consideration of national fires, ideas and picture of post-war international monetary agreement, proposed sepa rovely by the bloodless Plan and the Keynes plan. Huai-held plans and Keynes Plan with is the administration of international pecuniary institutions, stabilize the commute locate, the expansion of international tidy sum, and promoting world stinting development for the settle, but the way they ope direct. Because the united States boarded the supreme world leader of the ca pitalist world economic crisis and after reality War II, the dollars international status because of its qualification of the international fortunate reserves to go about a solid, the two sides r distributivelyed in April 1944, reflects the White Plan on the establishment of the GB currency experts of the store a sum statement. What is Bretton woods conference? The join Nations pecuniary and Financial Conference, commonly k todayn as the Bretton woodland conference, Bretton woods system or Bretton woods agreements. It was a gathering of 730 delegates from any 44 every(prenominal)ied nations at the muckle Washington Hotel, situated in Bretton Woods, bracing Hampshire, to regulate the international monetary and financial invest after the conclusion of World War II.The conference was held from 1-22 July 1944, when the agreements were gestural to set out up the International Bank for reconstructive memory and Development (IBRD), the General Agreement on responsibilitys and Trade (GATT), and the International Monetary computer storage (IMF). It established the rules for commercial and financial traffic among the worlds major industrial states in the mid(prenominal) 20th century and also was the first-year example of a fully negotiated onetary social club intended to govern monetary traffic among independent nation-states. As a moment of the conference, the Bretton Woods system of re-sentencing rate management was set up, which re importanted in pull until itself collapsed in 1971, when President Richard Nixon severed the liaison between the dollar and gold. What they agreed * composition of the IMF and the IBRD (World Bank) Adjustably secured foreign change over market rate system * Exchange rate were mend, with the training of changing them if necessary * Currencies were required to be convertible for tack related and opposite current account transactions * All element countries were required to subscribe to the IMFs capital * if mod ify rate capability not be favorable to a plains balance of defrayals position, the governments had the world-beater to revise them by up to 10% Whos knotty? Delegation from more than or less the worldAustralia India Belgium Iran Bolivia Iraq Brazil Liberia Canada Luxembourg Chile Mexico mainland China Netherlands Colombia New Zealand Costa Rica Nicaragua Cuba Norway Czechoslovakia Panama Dominican Republic Paraguay Ecuador Peru Egypt Philippines El Salvador Poland Ethiopia Union of sulfur Africa France Union of Soviet Socialist Republics (USSR) Greece join Kingdom Guatemala join States Haiti Uruguay Honduras Venezuela Iceland Yugoslavia The united States, having the largest missionary work, brought a wide spectrum of economists and politicians to the Bretton Woods Conference. China, represented by the Nationalist government of Chiang Kai-shek, played an busy role and was granted the fifth largest quota among the superior members of the IMF.Cuba, governed by Ramon Raul San Martin, sent a missionary station that represented the interests of small agricultural economies. Delegates from many an(prenominal) Latin American nations were deeply involved in the negotiations. The democratic process at Bretton Woods ensured that concerns of all countries were addressed. Though the delegation from the Soviet Union was active at the Conference and signed the draft Articles, the Soviet government later decided not to join the breed or the Bank. The cooperation of the U. S. and USSR delegations was a positive moment before the oncoming of the Cold War. In 1944, the Indian delegation to Bretton Woods included both British citizens as well as Indian nationals, as India was still part of the British Empire.Alexander Argyropulos (at right in photo), a member of the Greek delegation, arrived in New York on June 21. Argyropulos had been a prisoner of war for a year. His arrival in the United States culminated in the reunion with his wife and daughter, who had e scaped Greece when axis of rotation forces invaded. Camille Gutt one of the Belgian delegation. Once the Fund was established, Gutt was elected as its first Managing Director, a post he held until 1951. Outcomes The Conference conduct to the creation of three organizations in secern to lead the world deliverance in the right direction. The International Monetary Fund (IMF), the General Agreement on Tariff and Trade (GATT) and the World Bank.The IMF was intended for property track of the monetary form _or_ system of government, to balance the exchange rates, narrow restrictions on the foreign exchange rate, and provide loans to invest in the base of operations of developing countries and countries that had debts. The number of votes a country for the IMF board depends on its contribution element towards the reserve. The U. S, U. K, Japan, Germany have 40% of the votes. Out of that percentage, the U. S has 17% of the votes, making them the absolute majority power in the IMF. The GATT encouraged laissez-faire system, to make trade without government intervention, to tighten up taxes when two countries are trading with each other and make it fair. It is known now as the World Trade Organization.The World Bank main idea and purpose was to help third world countries and reduce poverty, and to corporations who want to aid the developing countries. The World Bank would offer loans to rebuild roadstead and utilities. These were the organizations that emerged from the Bretton Woods Agreement. Another outcome for the United States was the Dollar being a World Reserve Currency and that all trade and business will be through with(predicate) with(p) in American dollars. tear down trade between two different nations that do not use the American dollar as their currency will do business with each other development the dollar. For example the price of oil from Saudi Arabia will not be in Saudi Rials, but in American dollars. Then those dollars would be redeemabl e through gold from the U.S at a make uped price of 35$ per ounce. All the countries that signed the Bretton Woods Agreement agreed to fix their currency with the same value as the value of gold. The supply of silver a country had went apply in hand with its gold reserves. The countries that were not rich in gold, would have to borrow money in order to finance their investments and development. The system performed trade through stable and adjustable exchange rates. However there was an increase in demand for dollars which lead to an increase in trade deficits, and the value of the dollar remained high. The United states couldnt fix the exchange rate between itself and other urrencies. It became known as the nth currency occupation. All the countries currencies were at par with the US dollar. The United States worth of gold was $26 billion by 1964. The worlds worth of gold was $33 billion. many countries held the U. S dollar as their main reserve asset. Because of that, the Frenc h President, De Gaulle said the U. S had a privilege of unlimited financing, because of the majority of countries having dollar assets. The U. S was unable to erase its deficits. The ways in which the balance payment deficits could be corrected include deflating the economy by using a monetary policy, which means raising interest rates.Another policy to use is the Fiscal Policy that includes cut down government spending in order to reduce demand. The U. S could have also devalued its currency, which meant foreign currency prices are higher. This would reduce exports from foreign currencies, and more exports from the U. S. The Bretton Woods system was successful until 1971, August 15th. A few measures were taken to avoid the system going to fail. They included imposing an interest equalization tax to reduce the flush of investments and private capital. However this lead to more loans from foreign borrowers. A lot of the funds went to financial institutions in places lke Europe an d Japan. The United States President Nixon said the amount of gold that was sent out of the U.S for the 27 years since the agreement was unsustainable. He announced a 90-day freeze on wages and prices, a 10% import surcharge on imports and suspended converting dollars into gold. The value of gold had increased, until now the price of $35 per ounce remained. Even though many countries still owed money to the U. S and were in debt. References http//weber. ucsd. edu/jlbroz/Courses/Lund/handouts/Lecture12%20_Bretton_%20Woods. pdf http//id. wikipedia. org/wiki/Sistem_Bretton_Woods http//www2. econ. iastate. edu/classes/econ355/choi/bre. htm http//en. wikipedia. org/wiki/Bretton_Woods_system http//en. wikipedia. org/wiki/International_Monetary_Fund http//en. wikipedia. org/wiki/Gold_standard