Bretton Woods New Hampshire Agreement


The agreement could not promote discipline from the Federal Reserve or the U.S. government. The Federal Reserve was worried about a rise in the domestic unemployment rate due to the depreciation of the dollar. In an attempt to undermine the efforts of the Smithsonian agreement, the Federal Reserve lowered interest rates in order to pursue a predefined domestic policy goal of full domestic employment. With Smithsonian`s agreement, member countries expected dollars to return to the United States, but lower interest rates inside the United States led dollars to continue flowing from the United States to foreign central banks. The entry of dollars into foreign banks continued the process of monetizing the dollar abroad and thwarted the goals of the Smithsonian agreement. As a result, the price of the dollar on the free gold market continued to put pressure on its official price; Shortly after the announcement of a 10% devaluation in February 1973, Japan and the EEC countries decided to let their currencies float freely. This turned out to be the beginning of the collapse of the Bretton Woods system. The end of Bretton Woods was formally ratified by the Jamaican Agreement in 1976. In the early 1980s, all industrialized countries used variable currencies. [44] [45] Laura Knoy: OK, but I still appreciate the comment. Yes, he is absolutely right.

Here in New Hampshire, another great treaty or agreement was signed that, for similar reasons, had significant global repercussions. Post-war global capitalism suffered from a huge shortage of dollars. The U.S. had huge trade surpluses, and U.S. reserves were huge and growing. This is how multinationals and global aid from the United States were born. [29] Despite its name, the World Bank was not (and is) not the central bank of the world. At the time of the Bretton Woods Agreement, the World Bank was created to lend to European countries devastated by the Second World War. The World Bank`s focus has changed by lending money for economic development projects in emerging countries. Laura Knoy: Okay, this is Richard Nixon, who said in 1971 that many of them were put in place in the Bretton Woods agreement are no longer visible. He says we won`t worry if international partners set up a new monetary system.

Is that what they did? 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 favour incentives to bring price stability to global economies, while Keynes wanted a system that promoted economic growth. The “collective agreement was a huge international undertaking” for which it was prepared two years before the conference. These were numerous bilateral and multilateral meetings to find common ground on the policy of the Bretton Woods system. Laura Knoy: Seventy-five years ago this month, a new global financial system was born in a resort in the White Mountains of New Hampshire.

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