Weakness Of Bretton Woods Agreement

730 delegates from the 44 Allied nations 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 July 1 to 22, 1944 and signed the Bretton Woods Agreement on the last day. Through the establishment of a system of rules, institutions and procedures for regulating 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 was based on both gold and the U.S. dollar. Soviet representatives attended the conference, but then refused to ratify the final agreements and claimed that the institutions they had created were “branches of Wall Street.” [1] These organizations were commissioned in 1945 after the agreement was ratified by a sufficient number of countries. The Bretton Woods countries have decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a solid pool of national currencies and gold, which would be held by the IMF. Each member country of the Bretton Woods system then had the right to borrow as part of its dues, which it needed. The IMF was also responsible for implementing the Bretton Woods agreement. Bretton Woods provided for a fixed exchange rate system in the articles of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). The rules also aimed to promote an open system by requiring members to convert their respective currencies into other currencies and to make free trade. There is no provision in the agreement for the establishment of international reserves.

It expected that a new gold production would suffice. In the event of a structural imbalance, it expected national solutions, such as adjusting monetary value or improving a country`s competitive position by other means. However, the IMF had few resources to promote such national solutions. The Bretton Woods Agreement was launched in 1944 at a conference of all allied nations of the Second World War. It took place in Bretton Woods, New Hampshire. There is no doubt that the system worked fairly well until mid-1960, but the system had some weaknesses and contradictions embedded, under pressure from which it finally collapsed on August 15, 1971. Despite lengthy discussions between 1972 and 1974, no progress has been made in developing system reform measures. At a 1976 meeting in Jamaica, agreement was finally reached on some changes to the IMF statutes. These should be applied from 1978. There was only one limited purpose to improve the functioning of the managed swimmer`s system. There was broad consensus among powerful nations that the lack of exchange rate coordination during the interwar period had exacerbated political tensions.

This facilitated the decisions of the Bretton Woods conference. In addition, all the Bretton Woods governments agreed that the monetary chaos of the interwar period had brought some valuable lessons. By signing the agreement, the nations presented their exchange rates to international disciplines. In May 1971, West Germany left the Bretton forest system. Switzerland cashed in $50 million for gold. In early August 1971, France sent a warship into New York Harbor and received US$191 million in gold (Huffington Post).