Dziś jest sobota, 8th Maj 2021

Which Of The Following Was A Factor In The Collapse Of The Bretton Woods Agreement

Negative balance of payments, rising public debt due to the Vietnam War and the Great Society`s programs and monetary inflation by the Federal Reserve have led to a growing overvaluation of the dollar. [42] The exodus of American gold reserves culminated in March 1968 with the collapse of the London Gold Pool. [43] By 1970, gold hedging in the United States had worsened from 55% to 22%. Neoclassical economists said this was the point at which dollar holders had lost confidence in the ability of the United States to reduce budget and trade deficits. Despite the disintegration, the Bretton Woods Summit and the agreement are responsible for a number of particularly important aspects in the financial world. First, the creation of the IMF and the World Bank. To date, these two institutions are of paramount importance to the global economy. In 1971, the United States suffered from massive stagflation – a combination of inflation and recession that causes unemployment and weak economic growth. The articles represented a compromise between Harry Dexter White`s American plan and John Maynard Keynes`s British plan. The compromise created an adjustable peg system based on the U.S.

dollar, which can be converted to gold at $35 an ounce, with capital controls. The compromise gave members both the stability of exchange rates and the independence of their monetary authorities to maintain full employment. The IMF, based on the principle of a credit union, which allowed members to withdraw more than their initial gold quotas, was created to alleviate temporary current account deficits. This article analyzes a number of views of the cause of the collapse of the Bretton Woods system from various documents and is based on an assessment of the validity of these opinions in historical context. This article focuses mainly on qualitative measurements and does not contain appropriate models or graphs. It explains and evaluates only various factors that led to the collapse of the Bretton Woods system without drawing them in different diagrams to verify the effect. Further quantitative research could therefore be carried out. Further research could focus on mathematical simulations of the impact of different factors on exchange rates, which clearly shows the importance of each factor.

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