The Bretton Woods Agreement Gave Rise To

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. But on a larger scale, the agreement brought together 44 nations from around the world, who brought them together to solve a growing global financial crisis. It has helped strengthen the global economy as a whole and maximize international trade benefits. In May 1971, West Germany left the Bretton forest system. Switzerland cashed in $50 million for gold. In early August 1971, France sent a warship into New York Harbor and received US$191 million in gold (Huffington Post). On August 11, 1971, the British ambassador requested the cashing of $3 billion for gold (1/3 of the U.S. gold reserve, Tyler Durden), as President Nixon announced (copy) on August 15, 1971: The Bretton Woods Agreement was one of those turning points in the development of a more modern financial system and established the dollar as the standard currency for world trade after World War II. While the Bretton Woods system was demanting during the Nixon administration, the financial institutions created by the Agreement – the International Monetary Fund and the World Bank – remain part of the finances of the 21st century.

When the price of the currency (s) rises, net exports – X (e) – M (e) decrease, reducing the trade deficit. The Bretton Woods Agreement of 1944 introduced a new global monetary system. It replaced the gold standard with the U.S. dollar as the global currency. It thus established America as a dominant power in the global economy. After the agreement was signed, America was the only country capable of printing dollars. The U.S. Federal Reserve expressed concern about a rise in the domestic unemployment rate due to the depreciation of the dollar. To undermine the efforts of the Smithsonian Agreement, the Federal Reserve lowered interest rates in order to pursue a pre-domestic policy objective of full national employment.