Benign Neglect of Dollar: The Bretton Woods and Its Demise
In order to understand the present financial crisis in a longer perspective, it is essential to look at and realize the systemic changes both in the USA and the global economy over the last century. The postwar economic prosperity presented a sharp contrast to the economic devastation of the earlier period of two world wars. Against this backdrop, the new global economic and monetary system was built at the Bretton Woods summit in New Hampshire in 1944, where financial experts, economists, and policy makers from all nations had gathered to create a framework for establishing a new global economic order for sustained and broad-based economic growth based on mutually advantageous trade and investments and stable international monetary system. The new system based on cooperation and accommodation, rather than hostility, conflict, retaliatory politics, and economic policies emanating primarily from political and economic rivalries, paved the way for uninterrupted economic progress for more than two and a half decades until 1971. This era of economic growth and tranquility of the 1950s and 1960s could not be sustained further by the Bretton Woods Framework. By the beginning of the 1970s, the postwar global economic architecture was showing the signs of weakness under the stress of demands for sustainable global growth and its more equitable sharing among the nations.
KeywordsExchange Rate Central Bank European Central Bank Official Price Float Exchange Rate
- 1.Krause LB. A passive balance of payments strategy for the US, Brookings papers on economic analysis, No. 2, Washington, DC; 1970.Google Scholar
- 2.Haberler G, Willett TA. Strategy for US balance of payments. Washington, DC: American Enterprise Institute; 1971.Google Scholar
- 4.Brahmananda PR. Gold-money rift. Bombay: Vora Publications; 1969.Google Scholar
- 5.Despres E, Meier GM. A proposal for strengthening the dollar. In: International economic reform – collected papers of Emile Despres. New York: Oxford University Press; 1973.Google Scholar