The paper "Features of the Bretton Woods Agreement" is a great example of a macro and microeconomics coursework. Bretton Woods system, which seized operations in 1971, was the very last standard which used gold as a means of exchange (Eichengreen, 1996). It was established after World War two (WWII). The agreement to come up with a new international monetary system was discussed among allied powers even before WWII came to an end (Bloch, 1977). The negotiation in 1944 resulted in the creation of the Bretton Woods Agreement. Bretton Woods is the name of a small tourist spot that is located in New Hampshire, America.
It is at Bretton Woods where delegates gathered to come up with a novel global economic system (James, 1996). Their most vital goal was to prevent every country from following self-centred policies, for instance, forming trade blocks, protectionism and competitive devaluation. It is noted that in 1930s trade blocks damaged the world economy (Coblentz, 2002, p. 12). John M. Keynes was in charge of the British delegation while the US side was headed by Harry D. White who worked for the American Treasury Department (Calleo & Rowland, 1973).
The new system's contents were negotiated by the US and Britain. As an economic power and a dominant military, the Americans took the leadership of the system away from Britain. At the time Britain was losing overseas influence and was war-torn (Moggeridge, 1980, p. 101). The British proposal was not accepted and the US idea was the foundation of the newly founded IMF (International Monetary Fund). The British proposal that was disallowed was to come up with a mighty settlement union for each and every country.
Every country was to have an official account at the proposed mechanism and all the balance of payments (BOP) deficits and surpluses would be jotted down and settled through the aforementioned accounts. This would imply that both the shortfall and surplus countries bear the responsibility for making sure that the imbalance is corrected (Bordo & Eichengreen, 1993). However, the revolving fund which was feebler was taken up. It was coined by America. In this system, every country would contribute a given quantity (labeled "quota") to the fund and member countries which had BOP problems would borrow (or "buy" hard money) from this fund.
This implied that only countries with deficits would be vested with the responsibility for rectifying the imbalance (Gavin, 2003). (Britain was anticipated to be a country with a shortfall at the culmination of WWII while America was anticipated to be a country with a surplus. ) In the 1950s, the borrowing countries were anticipated to implement macroeconomic policies so as to trim down the shortfall. This strategy was termed as conditionality (Coblentz, 2002). The World Bank (International Bank for Development in conjunction with Reconstruction) was also established by the Bretton Woods Agreement (Cordell, 1948, p.
81). The preliminary purpose of the World Bank was to aid in the reclamation of war-ravaged Japan and Europe. But in a real sense, the reclamation of Europe was helped by the Marshall Plan which was a large American aid program and that of Japan was helped by the American bilateral aid. The World Bank is now an organization that assists developing countries. The World Bank and IMF were denoted to as Bretton Woods sister establishments (Copeland, 2000, p.
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