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Which Of The Following Is Not True Regarding The Bretton Woods Agreement

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Which Of The Following Is Not True Regarding The Bretton Woods Agreement

On October 15, 2021, Posted by , With No Comments

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. In order to ensure economic stability and political peace, States have agreed to cooperate to closely regulate the production of their currencies in order to maintain fixed exchange rates between countries, with the aim of facilitating international trade more easily. This was the basis of the Us vision of post-war global free trade, which also included reducing tariffs and, among other things, maintaining a trade balance via fixed exchange rates that would be favorable to the capitalist system. To promote the growth of world trade and the reconstruction of Europe after the war, 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 approved capitalization of $10 billion and had to lend from its own resources to take out private loans and issue securities to raise new funds to enable a rapid recovery from the war. The IBRD was to be a specialized agency of the United Nations responsible for providing credit for economic development. The Bretton Woods countries decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a fixed pool of national currencies and gold that would be held by the IMF. Each country that is a member of the Bretton Woods system would then have the right to borrow what it needs as part of its contributions. The IMF was also responsible for the implementation of the Bretton Woods Agreement. The result was largely reflected in the United States. Preferences: a system of subscriptions and quotas integrated into the IMF, which itself should only be a fixed pool of national currencies and gold subscribed by each country, as opposed to a world central bank capable of creating money.

The fund has been tasked with managing the trade deficits of various countries so that they do not cause currency devaluations that would trigger a decline in imports. Thus, more developed market economies aligned themselves with the U.S. vision of post-war international economic management, which aimed to create and maintain an effective international monetary system and promote the removal of trade barriers and capital flows. In a way, the new international monetary system was a return to a system similar to the pre-war gold standard, using only US dollars as the new world reserve currency until international trade redistributed the world`s gold reserves. The agreement could not promote discipline from the Federal Reserve or the U.S. government. The Federal Reserve was concerned about an increase in the domestic unemployment rate due to the depreciation of the dollar. In an attempt to undermine the efforts of the Smithsonian agreement, the Federal Reserve lowered interest rates to pursue a predetermined domestic policy goal of full domestic employment. With the Smithsonian agreement, member countries expected dollars to return to the United States, but the reduced interest rates in the United States meant that dollars continued to flow from the United States to foreign central banks. The influx of dollars into foreign banks continued the process of monetizing the dollar overseas and thwarted the goals of the Smithsonian agreement. .

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