Bretton Woods Agreement Created

In order to stimulate the growth of world trade and the reconstruction of Europe after the war, the Bretton Woods planners created another institution, the International Bank for Reconstruction and Development (IBRD), which is one of the five agencies that make up the World Bank Group and is now perhaps the most important branch [of the World Bank Group]. The IBRD had an authorized capitalization of $10 billion and was expected to lend from its own resources to take out private loans and issue securities to raise new funds to enable a rapid recovery after the war. The IBRD should be a special agency of the United Nations responsible for providing credit for economic development purposes. Despite the disintegration, the Bretton Woods summit and the agreement are responsible for a number of aspects that are particularly important in the financial world. First, the creation of the IMF and the World Bank. To date, both of these institutions are essential to the global economy. The Bretton Woods Agreement was created in 1944 at a conference of all allied nations of World War II. It took place in Bretton Woods, New Hampshire. The Bretton Woods Agreement was one of those turning points in the development of modern financial systems that, after World War II, established the dollar as the standard currency for world trade. While the Bretton Woods system ended under the Nixon administration, the financial institutions created by the agreement – the International Monetary Fund and the World Bank – remain permanent elements of twenty-first century finances. The Bretton Woods agreement remains an important event in world financial history. The two Bretton Woods institutions he established at the International Monetary Fund and the World Bank played an important role in the reconstruction of Europe after the Second World War.

Subsequently, both institutions maintained their founding goals while serving today`s global government interests. In 1960, Robert Triffin, a Belgian-American economist, noticed that keeping dollars was more valuable than gold, because constant deficits in the U.S. balance of payments helped maintain the liquid system and stimulate economic growth. What was to be known later as Triffin`s dilemma was predicted when Triffin discovered that if the U.S. stopped it to stem deficits, the system would lose its liquidity, it would not be able to keep up with global economic growth and thus shut down the system. But such payment deficits also meant that over time, deficits would undermine confidence in the dollar, as the reserve currency generated instability. [33] The De Bretton Woods system was introduced as a more stable substitute for the gold standard, according to which all currencies were convertible into gold. According to the new agreement, the dollar was the norm for international transactions, the value of which was set at 1/35 of an ounce of gold. The fact that the United States held a large part of the world`s gold reserves allowed the dollar to assume its new role as the standard currency on which stock markets were based. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations that would oversee the new system.

However, on a larger scale, the agreement united 44 nations from around the world and brought them together to resolve a growing global financial crisis.