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Bretton Woods Agreement Meaning

Despite its name, the World Bank has not been (and is) not the central bank of the world. At the time of the Bretton Woods agreement, the World Bank was created to lend to European countries devastated by the Second World War. The World Bank`s focus has changed in lending to economic development projects in emerging countries. As chief economist of the U.S. Treasury in 1942-44, Harry Dexter White designed the U.S. Cash Access Project, 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 assurance of reissue by the gold standard began to become a serious problem in the late 1960s. In 1971, the problem was so serious that U.S. President Richard Nixon announced that the possibility of converting the dollar to gold was “temporarily” suspended. The stage was inevitably the last straw for the system and the agreement that sketched it. 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. The Bretton Woods Agreement was concluded in 1944 at a summit in New Hampshire, USA, on a website of the same name. The agreement was reached by 730 delegates representing the 44 allied nations who participated in the summit.

Delegates, as part of the agreement, use gold standard gold In the simplest terms, the gold standard uses a system to understand the value of the currency, and this means that a currency is compared to how much it is worth in gold and at what price it can be exchanged for gold. to establish a fixed exchange rate. As part of the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. If a country`s monetary value became too low against the dollar, the bank would buy its currency back on the foreign exchange markets. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations, to oversee the new system.

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