Bretton Woods Agreement

In: Business and Management

Submitted By toe1994
Words 2408
Pages 10
Topic: Essay topic No.2 Describe the most important features of the Bretton Woods Agreement. Why did the Bretton Woods ‘system’ break down and what has replaced it? Due Date: 06 May 2013 Word Count: With Reference list 2,265 Without reference list 2,143

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The Bretton Woods Agreement was an international monetary system based on the United States (US) dollar (Wild and Wild, 2012, p.294). The Bretton Woods agreement followed the gold standard (1879-1914) which nations linked the value of their currencies to specific values of gold. This new system was designed to monitor exchange rates and lend reserve currencies to countries with trade deficits, and the latter to provide third world nations with needed capital. (Stephey, 2008, para. 3) In July, 1944, in Bretton Woods, New Hampshire, representatives from 44 nations met to create standards by which international trade and finance would be conducted once World War Two (WWII) ended (Addran College of Liberal Arts (ACLA), (n.d), para 1). The system that developed was a gold exchange standard. The US dollar was fixed to gold and convertible on demand at $35 an ounce. All other currencies were fixed to the dollar and were allowed to waver around that value only within a very small amount (ACLA, (n.d), para. 3). The Bretton Woods agreement was introduced to balance the strict discipline of the gold standard with the flexibility that countries needed to deal with impermanent domestic monetary issues (Wild and Wild, 2012, p.294). According to the US treasurer at the time Henry Morgenthau, the aim was to create a dynamic world community in which peoples of every nation would be able to realise the potentialities in peace (University of Shed (UOS), 2011). The agreement aimed to rebuild after WWII through a series of currency stabilisation programs and infrastructure loans to war torn nations. By 1946 the system was in full…...

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