730 delegates from the 44 Allied countries prepared for the rebuilding of the international economic system during World War II and gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, USA, for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. Delegates deliberated from 1 to 22 July 1944 and signed the Bretton Woods Agreement on the last day. By establishing a system of rules, institutions, and procedures to regulate the international monetary system, these agreements created the IMF and the International Bank for Reconstruction and Development (IBRD), now part of the World Bank Group. The United States, which controlled two-thirds of the world`s gold, insisted that the Bretton Woods system be based on both gold and the U.S. dollar. Soviet representatives attended the conference, but later refused to ratify the final agreements, claiming that the institutions they created were “branches of Wall Street.” [1] These organizations began their work in 1945 after a sufficient number of countries had ratified the Convention. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations to oversee the new system. The Bretton Woods Agreement was reached in 1944 at a summit meeting in New Hampshire, USA, at a site of the same name. The agreement was reached by 730 delegates, who were representatives of the 44 allied nations who attended the summit. Delegates used the gold standard as part of the agreement, in the simplest terms, the gold standard is a system used to understand the value of money, and this means that a currency is compared to how much it is worth in gold and at what rate it can be exchanged for gold. to create a fixed exchange rate. The agreement also created extremely important structures in the financial world: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), now known as the World Bank.
A devastated Britain had little choice. Two world wars had destroyed the country`s main industries, which paid for the import of half of the country`s food and almost all raw materials except coal. The British had no choice but to ask for help. It is only in the United States on the 6th. In December 1945, the British Parliament ratifies the Bretton Woods Agreements (which then took place in December 1945). [24] The agreement did not contain any provision on the creation of international reservations. He assumed that a new production of gold would suffice. In the case of structural imbalances, it expects national solutions, e.B an adjustment in the value of the currency or an improvement in a country`s competitive position by other means.
However, the IMF had few resources to promote such domestic solutions. Despite their break-up, the Bretton Woods Summit and the agreement are responsible for a number of particularly important aspects in the financial world. First of all, there is the creation of the IMF and the World Bank. Both institutions are still crucial to the global economy today. Supporting money with the gold standard began to become a serious problem in the late 1960s. In 1971, the problem was so serious that US President Richard Nixon announced that the ability to convert the dollar into gold would be “temporarily” suspended. This decision was inevitably the straw that broke the camel`s back for the system and the agreement it described. The IMF has sought to provide for occasional discontinuous exchange rate adjustments (changes in a member`s nominal value) through international agreements. Member States were allowed to adjust their exchange rate by 1%.
This tended to restore the balance of their trade by increasing their exports and reducing their imports. This would only be allowed if there was a fundamental imbalance. A reduction in the value of a country`s currency was called a devaluation, while an increase in the value of the country`s currency was called an appreciation. Despite its name, the World Bank was not and is not the central bank of the world. At the time of the Bretton Woods agreements, the World Bank was created to lend to European countries devastated by the Second World War. The Bretton Woods rules, set out 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 also aimed to promote an open system by requiring members to convert their respective currencies into other currencies and to trade freely. As the U.S.
Treasury`s international chief economist in 1942-44, Harry Dexter White drafted the U.S. Plan for International Access to Liquidity, which rivaled Keynes` plan for the British Treasury. Overall, White`s plan tended to favor incentives to create price stability in global economies, while Keynes wanted a system that fostered economic growth. The “collective agreement was a huge international undertaking”, the preparation of which took two years before the conference. These were numerous bilateral and multilateral meetings aimed at finding common ground on the policies that would constitute the Bretton Woods system. The United States launched the European Economic Recovery Plan (Marshall Plan) to provide substantial financial and economic assistance for Europe`s reconstruction, largely through grants rather than loans. .