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The Bretton Woods system, designated after the conference of Bretton Woods, was a monetary system, which was certain as key currency of the gold-deposited US Dollar. The Bretton Wood organizations are the group of World Banks and the International Monetary Fund (IWF).

Establishment and a goal

On 22 July 1944 to the conference by Bretton Woods (New Hampshire, the USA) by 44 states still during the Second World War as stable a monetary system as possible one decided. A goal was the smooth and from commercial barriers released completion of the world trade with firm rates of exchange. The system had 1973 existence up to its collapse.

To the conference two plans for a world monetary system were discussed:

  • A suggestion of the American Harry Dexter White
  • and the draft of the Englishman John May pool of broadcasting corporations Keynes (see below).

The different conceptions in the two plans can be explained by different initial positions. The British were guessed/advised by the war sequences into a pronounced debtor position with strong trade deficit. Besides the re-establishment of full employment was one of the principal purposes of their economic policy, which the occupation-political possibilities of the theory of Keynes came to meet. To the Americans as creditor nation applied exactly the opposite.

The White plan was decided, in whose center the US Dollar was located. Its value was fixed to ounce opposite the gold on 35 $ for each and it existed an obligation of the US central bank to redeem dollar in gold. The other members of the system agreed upon rigid of rates of exchange in relation to the dollar. The system was therefore asymmetrically arranged: The USA were completely autonomous in its currency and monetary policy, while all other members of the Bretton Woods system had to guarantee their rate of exchange in relation to the dollar by foreign exchange market interventions. Only if durable unequal weights resulted, the rate of exchange could changed, to be thus up or devalued in the context of an international agreement (Realignment).

When instrument for interferences, if the system gets an inclination, became the International Monetary Fund (IWF) based. Likewise in this connection the international bank for reconstruction and development (World Bank) was created, which make today credits available for development policy.

Crisis and collapse

Already 1969 drew the attention of Robert Triffin to the meeting in dilemma designated after it.

As long as the USA did not exhibit large foreign trade deficits, the dollar thus was internationally scarce, worked this system smoothly. When however the USA began to finance the Viet Nam war by increase of the money supply (and thus indirectly by the other member countries) the world with dollar was inundated. Consequently the connection of the dollar to the gold and the associated gold redeeming warranty of the USA no more were not to be held. The attached countries had to buy up however dollar, in order to hold their rate of exchange, which with the reality no more did not agree frequent. When France 1969 wanted to redeem its dollar reserves in gold, the USA were internationally insolvent, since the gold reserves were not even sufficient, in order to fulfill the demands of only one member country. 1971 quit the USA by president Nixon their obligation to redeem dollar in gold.

Up to then for example the fixed rate of exchange of DM was with 4:1 (1 US-$ was evaluated to 4 DM). When however 1973 the rate of exchange of DM was released, the course of the dollar fell opposite DM in the course of the next years up to 2:1. DM was thus underestimated in relation to the dollar long time clearly. This meant a disadvantage of the German economy in relation to the US economy.

After notice of the gold redeeming obligation by the USA the Bretton Woods system broke down 1973 finally. After release of all rates of exchange developed into the 1980er years the dollar crisis. From now on other concepts played a role, for instance the

By the Bretton Woods system created International Monetary Funds (IWF) and the World Bank remained.

The alternative of Keynes

The rejected suggestion of Keynes planned to create an international European Payments Union internationally the clearing union (ICU). The central banks - both those of the member countries and others - should maintain accounts at this organization. Over these accounts the mutual payment rivers between the currencies should become balanced: Countries, which take more foreign exchange than spend, would have led to a credit on their account. Countries with more expenditures than incomes would have a target on their account. The accounts should be led in that particularly for it created international currency Bancor. This currency was planned, similar to the special drawing rights of the International Monetary Fund only as Buchgeld. On the Bancor no notes and coins should be spent, and credits at business banks and participants in the economy should be able to be given only in national currencies.

Keith J. Horsefield: The internationally Monetary find 1945-1965: Twenty Years OF internationally Monetary Cooperation. Internationally Monetary find document, Washington, DC 1969 (volume III), P. 3

An intention of Keynes suggestion was to induce surplus and countries with a deficit to diminish the unequal weights in their balances of payments. It planned to grant to each country a maximum ratio which would have been measured at the portion of the country of the world trade. If the assets or target of a country would be convenient over its ratio, then the country interest should pay between 5 and 100% to the ICU. With this instrument it would become unattractive for the creditor countries to gain strong surplus since these would have been again exhausted over the interest. But, as the ratio should be computed exactly, different suggestions existed.

Also with the key it suggestion no flexible rates of exchange were intended: The rate of exchange of individual currencies to the Bancor would have been firm, but in regular intervals adaptable.

International currency regime after Bretton Woods

The idea of an international Buchgeldes was again taken up by the European community 1975 with the introduction ECU (European Currency unit) as pure accounting unit, however without money retaining costs to the rotating safety device.

Literature

  • Bernd mustard: The fog around the money. 7. Aufl. Gauke, 2004. ISBN 3-87998-435-2
  • Elke Muchlinski: Controversies in the international monetary policy. Retrospective one to Keynes White Boughton and IMF. In: Intervention. Magazine for economics, 1/2/2005 P. 57-73
  • Elmar old father, the world monetary crisis. European publishing house, Frankfurt/Main.
  • Mr., money, currency competition and monetary systems: theoretical and historical analysis international money managing. Campus publishing house, Frankfurt/Main.

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