In this article, We learn about "Bretton Woods Agreement".Let's Go!
The Bretton Woods Agreement was an international monetary system established in July 1944 at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, USA.
The agreement aimed to create a stable global economic environment following the chaos caused by World War II and the Great Depression.
Representatives from 44 countries attended the conference, with the primary architects being John Maynard Keynes from the United Kingdom and Harry Dexter White from the United States.
The Bretton Woods Agreement led to the creation of a fixed exchange rate system, where the currencies of participating countries were pegged to the U.S. dollar, which in turn was pegged to gold at a fixed rate of $35 per ounce.
This system aimed to prevent competitive currency devaluations and promote international trade and investment.
The agreement also established two significant international financial institutions:
- International Monetary Fund (IMF)
- World Bank
The IMF was created to monitor exchange rates and provide financial assistance to countries facing balance of payment problems.
The World Bank’s main purpose was to provide funding for post-war reconstruction and development projects in member countries.
The Bretton Woods system worked well for a time, but it began to break down in the 1960s.
The main problem was that the US was running a large trade deficit, which meant that it was importing more goods and services than it was exporting.
This caused the US to lose gold, which was the basis of the Bretton Woods system.
In 1971, due to mounting economic pressures and inflation., the US government announced that it would no longer convert US dollars into gold.
This effectively ended the Bretton Woods system and led to the collapse of the fixed exchange rate system and the emergence of a floating exchange rate system, which is still in use today.
The Bretton Woods Agreement was a landmark event in the history of international economics.
It helped to promote economic growth and stability after World War II, and it laid the foundation for the modern international monetary system.
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