What explains the demise of the Bretton Woods system Essay

What explains the demise of the Bretton Woods system - Essay ExampleThe joint guess brought about a system wherein countries having problems in balance of salarys can solve it because of one of the feature of set exchange judges in the agreement. This has laid to an economic reconstruction in Europe for a re totallyy long decade which in turn gave rise to capitalist expansion, which has not been seen bowl date. This gave an added boost to the global economy where mostly in the capitalist countries, the standard of living of the working class has improved to a very high extent. (Bordo & Eichengreen, 1993). In the period of post World War 1, majority of the countries had a angle of incli province to go back to the previous situation of financial stability and security as it prevailed before such(prenominal) wars were held. The old gold standard were again preferred and each country tried to incline towards it and by 1926 all the leading economies again readyed the system and a ccordingly the circulating money of every nation had to be geared by gold reserves and foreign currencies to a huge extent. But eon implementing the gold several steps were under spudn mistakenly as a result of which the economic and financial relationss collapsed leading to the Great Depression in 1929. In order to reduce the deficit in payment balance by deflating its currency every single country gave a boost to its export proceeds to increase its competitiveness in productivity. This idea fell in manoeuver and was running successfully till the countries continued deflating their currencies. This over laid phenomenon marked an international deflation competition which led to unemployment among masses, enterprises were rubbed out of bankruptcy, many accredit institutions failed and also hyper inflation was noted to occur in various countries concerned. (Kenen, 1994 Moggridge, 1980). Due to this phenomenon of Great Depression, several conferences who were dealing with the wor ld monetary problems ended up in failure in the decade of 1930s. But every country tended for a stabilizing system that rectified mistakes which became one of the evident phenomenons. After this, several plans were do in order to build an innovative monetary system and an institution that will supervise all sorts of actions and financial hazards. During the war time conditions, all of the initial negotiations happened. (Kenen, 1994 Moggridge, 1980). In Bretton Woods, New Hampshire (USA), an international conference took place in 1944. This conference was attended by 44 countries so as to restructure the international finance and currency relationships. The International Monetary Fund (IMF) and The International Bank For Reconstruction And Development (IBRD/ World Bank) was created by the participants of this conference . In addition, they also accepted the fact of implementing a system of fixed exchange rate with the U.S dollar as the leading currency. Harry Dexter White, the Ameri can Minister of State in the U.S exchequer and the British Economist John Mayard Keynes were responsible to develop the plans for the Bretton Woods system. They also stated that they want to establish a system which would be acceptable by all the nations. The ideas of Harry Dexter and Keynes always happened to be very similar to each other. The White Plan supplements that a Bank for Reconstruction and an International stabilisation Fund should be put up. This was similar to what Keynes has described in his plan. But there was a comminuted difference which got reflected in Keynes plan was he wanted to vest the IMF ideas with possibilities to create money and with the authority to take actions on a very large scale. Whenever there will be imbalances in the balance of payments two the sides, that is, both the debtors and creditors must change their policies. Countries that have their payments in excess should increase their scale of imports from the countries