As chief international economist at the U.S. Treasury, Harry Dexter White designed the U.S. Cash Access Project in 1942/44, which rivaled Keynes`s plan for the British Treasury. Overall, White`s system tended to favour incentives to create price stability in the world`s economies, while Keynes wanted a system that promoted economic growth. The ”collective agreement was a huge international undertaking,” which took two years before the conference to prepare for it. It consisted of numerous bilateral and multilateral meetings to find a common basis for determining the policies that would be behind the Bretton Woods system. 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 food and almost all of its raw materials except coal. The British had no choice but to ask for help. It was only when the United States signed a 4.4 billion pound British aid agreement on 6 December 1945 that the British Parliament ratified the Bretton Woods Agreements (which took place later in December 1945).
[24] 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. The Bretton Woods system is a series of uniform rules and guidelines that have provided the framework for the creation of fixed international exchange rates. Essentially, the agreement called on the new IMF to set the fixed exchange rate for currencies around the world. Each country represented assumed responsibility for maintaining the exchange rate, with incredibly narrow margins above and below. Countries struggling to stay within the fixed exchange rate window could ask the IMF for an adjustment in interest rates for which all allied countries would then be responsible. 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. It was necessary to reverse this river.
Although all nations wanted to buy U.S. exports, the dollars had to leave the United States and be available for international use so that they could do so. In other words, the United States should reverse global prosperity imbalances by chartering a trade deficit financed by the U.S. outfed of reserves to other nations (a deficit in the U.S. fiscal balance). The United States could have a financial deficit, either by building plants, or by building plants, or by foreign nations. Remember that speculative investments were discouraged by the Bretton Woods agreement. Imports from other nations were not attractive in the 1950s because American technology was up to date at that time. This is how multinationals and global aid from the United States originated. [29] Most nations outside the Communist bloc have become members of the IMF.
b) The Federal Reserve system has concluded a series of monetary sweaas agreements with central banks in Western Europe, Canada and Japan. Under these bilateral agreements, a foreign central bank granted reserve loans (in foreign currencies) to the Federal Reserve system in exchange for an equal amount of reserve credits (in dollars). The collapse of the Bretton Woods system is the subject of intense debate. There are many theories as to why it did this, from the continued pressure of Fiat`s money to maintaining attachment to gold, to budget deficit problems, to the Vietnam War, to marginal tax rates. The fundamental point of the agreement is that the United States has experienced a growing trade deficit and has ultimately been unable to establish credibility in limiting that deficit.
