What is the agreement about Bretton Woods?
The Bretton Woods Treaty introduced a financial structure for an international monetary exchange between nations after World War II. The main systems and organizations that have been created as a result of this agreement include the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD) - the predecessor of the World Bank - and the system of global exchange courses. While the Bretton Woods Agreement was significant because it concerned the cooperation and determination of many nations, it would later fail, partly due to insufficient understanding of the changing nature of global markets. 44 participating nations also hoped to stabilize the monetary system and revive the world trade, which has fallen due to the war and earlier large depression. These problems were led by a solid exchange rate of cash exchange or "tied" to gold to determine the value of the currency used in international trade.
Every country represented at the Bretton Woo conferenceDS agreed that the value of gold would determine how much the currency of each nation would cost. All participating countries decided to set up their currency on the dollar, which was awarded for $ 35 per ounce of gold. The supply of gold currency value has basically reduced the money supply to the amount of world gold reserves, creating apparent stability. The IMF was supposed to act as a moderator for the business and imbalance of the golden value between nations.
The United States held most of the world's gold reserves and was dominant by economic power, so it played an important role in influencing other nations to accept the Bretton Woods agreement, which combines the value of currency with gold through U.S. dollar. The United States also had the main position because they avoided the devastation of the infrastructure that occurred in Europe during the war, and due to the mass industrialization needed for the delivery of warships. Repairing devastation in Europe would eventually require more sources than those provided by the Bretton Woods agreement, which would result in youCreation of the European Recovery program, also called Marshall Plan.
Problems appeared with the agreement on Bretton Woods when the need for capital by the war ravaged Europe and third world nations outperformed the American gold reserves. The value of gold in the open market also often varied from a fixed exchange rate of $ 35 per ounce that still uses central banks. In order to provide the world with the necessary capital, the number of dollars had to increase because the mining of other gold reserves was not sufficient. This excessive offer of the US dollar has weakened its value. The United States in 1971 released the gold standard and Bretton Woodssy was eventually replaced by the currency award on the basis of market rates.