The Long-Predicted Failure of the Post-Bretton Woods “Non-System”

2022 ◽  
pp. 1-8
Keyword(s):  
Saudi Arabia ◽  
Exchange Rates ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
Us Government ◽  
Oil Shock ◽  
World Economic ◽  
Us Dollar

The monetary system implemented at Bretton Woods in 1944 made the US dollar the centre of the world economic system, with 43 other countries' currencies linked to it via fixed exchange rates. However, once the US government broke its promise to redeem dollars in gold at $35 per ounce on August 15, 1971, expansion of the supply of dollars was no longer constrained, and like many currencies before it, the lack of monetary discipline led to inflation through which the value of the dollar has fallen by about 98%. The “oil shock” of the 1970s led to the introduction of the “petro-dollar” system whereby Saudi Arabia, then the largest oil producer, agreed to accept only US dollars in payment for its oil in exchange for the US government's pledge to defend it. This shored up demand for the fiat US dollar, enabling it to survive until its now approaching endgame.

scholarly journals The US dollar and new imperialism under the logic of capital accumulation

2019 ◽  
Vol 2 (1) ◽  
pp. 98-107
Author(s):  
Haiping Qiu ◽  
Min Zhao
Keyword(s):  
Capital Accumulation ◽  
International Monetary System ◽  
Content Type ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
The Status ◽  
The Usa ◽  
New Imperialism ◽  
Us Dollar

Purpose The world currency is endowed with two inherent contradictions, namely, the general contradiction of all currencies and the special contradiction between the quality and quantity of the world currency. The paper aims to discuss these issues. Design/methodology/approach In the wake of the Second World War, the USA, with its strong economic and military strength, established an international monetary system centered on the US dollar (USD). This gave USD the status of “world currency” and bounded it to the US imperialist hegemony with mutual integration and interaction, making it possible for USD capital to conduct international exploitation and wealth plundering extensively around the world. Findings The contradiction between the capital logic and the power logic, which is inherent in capital accumulation models of the new imperialism, also indicates the inevitable decline of USD. Originality/value This constitutes an important feature of the new imperialism. However, as a sovereign currency, USD has inextricable and inherent contradictions while exercising its function as the world currency.

The Principles and Operation of the Bretton Woods International Monetary System in the Years 1944–1971. The Reasons for Its Collapse

2016 ◽  
Vol 8 (2) ◽  
pp. 0-0
Author(s):  
Zbigniew Klimiuk
Keyword(s):  
International Trade ◽  
World Economy ◽  
International Monetary System ◽  
The United States ◽  
International Liquidity ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
The Stability

The subject of the article is an analysis of the role of the US dollar in the development of international trade and the world economy during the period of the Bretton Woods monetary system (1944–1971). The international monetary system existing at that time was, in principle, a gold exchange standard based mainly on the national currency of the United States. However, a relatively small role was also played by other currencies including, in particular, the pound sterling. It should be noted that the Bretton Woods rules did not match the conditions in the world economy which emerged after World War II. The main areas of criticism concerned such assumptions as the maintenance of an official fixed price for gold, or a too narrowly interpreter postulate for the stability of the exchange rate. On the other hand, it should be noted that the introduction of the stability of exchange rates and the abolition of restrictions on payments were fundamentally sound decisions. They led in fact to the minimisation of a risk inherent in international trade and its rapid growth. One should also emphasise the fact that from the very beginning, in the international gold based monetary system there was an internal contradiction (paradox), which eventually led to its collapse. This was namely the fact that the growth in world trade created a growing demand for international liquidity. This was tantamount to a necessity to maintain a permanent balance of payments deficit in respect of the country whose currency was considered the key currency. At the same time, the growing volume of the US currency resulted in an increasing crisis of confidence in the dollar.

Ideas, Interests, and the Transition to a Floating Exchange System

2020 ◽  
Vol 32 (2) ◽  
pp. 151-182
Author(s):  
YOUN KI ◽  
YONGWOO JEUNG
Keyword(s):  
Exchange Rates ◽  
International Monetary System ◽  
Business Leaders ◽  
Business Practices ◽  
Global Finance ◽  
Economic Interests ◽  
Monetary System ◽  
The Us ◽  
Us Government ◽  
Material Interests

Abstract:Milton Friedman’s idea of flexible exchange rates was heresy for Americans until the mid-1960s. However, by the late 1970s the idea became embedded in academic thought, policymaking, and business practices. This article analyzes how floating currencies, once eschewed, became embraced as legitimate in the US through the late 1960s and early 1970s. It demonstrates how business leaders’ economic interests and laissez-faire economists’ framework for causes of and solutions to business hardships contributed to society’s acceptance of currency flexibility. Increasing societal support of flexible currencies strengthened the power of float-advocates within the US government, facilitating the transition of the international monetary system from fixed exchange rates to floating. This study highlights how material interests and policy discourses contributed to America’s new policy orientation. It also addresses the origins of the neoliberal international financial order by documenting how American elites reconstituted the state-market balance in global finance while navigating monetary crises.

scholarly journals Bretton Woods 2 system and US balance of payment deficit

2008 ◽  
Vol 60 (1) ◽  
pp. 116-136
Author(s):  
Zaklina Stepanovic-Petrac
Keyword(s):  
International Monetary System ◽  
Financial Architecture ◽  
Bretton Woods ◽  
Monetary System ◽  
International Financial Architecture ◽  
National Currencies ◽  
The Us ◽  
The Usa ◽  
Us Dollar ◽  
Foreign Exchanges

The author explores the evolution, functioning, similarities and differences between the original Bretton Woods international monetary system that operated from 1945 to 1973 and the present modified institution, which is symbolically called Bretton Woods 2 System. The existing international financial architecture keeps on being based on the hegemony of the US dollar, as a dominant reserve currency. However, in spite of the fact that in most cases the present international monetary system implies the regime of flexible foreign exchanges rates, a characteristic of this system is that many countries in different degrees refuse to accept the appreciation of their national currencies to the US dollar. At the same time, the domination of the USA, the most indebted country in the world, is becoming a very serious threat to its sustainability. However, as the author concludes, the creators of the international monetary system, being aware how serious could be the consequences of its cessation, endeavor to extend its operation accepting less expensive consequences of keeping it alive.

scholarly journals A Brief History of the International Monetary System since Bretton Woods

2017 ◽  
Author(s):  
José Antonio Ocampo
Keyword(s):  
Global Economy ◽  
Ad Hoc ◽  
International Monetary System ◽  
Negative Effects ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
Us Government ◽  
History Of ◽  
The 1960S

The 1944 Bretton Woods Conference, which created the International Monetary Fund and the International Bank for Reconstruction and Development, was a major landmark in international cooperation. However, the Bretton Woods system came under increasing pressure in the 1960s due to the lack of a reliable adjustment mechanism to manage payment imbalances as well as the persistent asymmetries in the balance-of-payments pressures faced by surplus and deficit countries. In 1971 the system effectively collapsed when the US government suspended convertibility of dollars into gold for other central banks—a decision that would prove to be permanent. The system that evolved to replace it can be viewed as a ‘non-system’ with diverse ad hoc arrangements. Viewed overall this non-system has proved to be fairly resilient, but some of its major gaps continue to have negative effects on the global economy.

scholarly journals The evolution of the Offshore US-Dollar System: past, present and four possible futures

2020 ◽  
Vol 16 (6) ◽  
pp. 767-783 ◽  
Author(s):  
Steffen Murau ◽  
Joe Rini ◽  
Armin Haas
Keyword(s):  
Hierarchical Structure ◽  
International Monetary System ◽  
Central Banks ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
Money Creation ◽  
Us Dollar ◽  
To Come

AbstractLittle has contributed more to the emergence of today's world of financial globalization than the setup of the international monetary system. In its current shape, it has a hierarchical structure with the US-Dollar (USD) at the top and various other monetary areas forming a multilayered periphery to it. A key feature of the system is the creation of USD offshore – a feature that in the 1950s and 60s developed in co-evolution with the Bretton Woods System and in the 1970s replaced it. Since the 2007–9 Financial Crisis, this ‘Offshore US-Dollar System’ has been backstopped by the Federal Reserve's network of swap lines which are extended to other key central banks. This systemic evolution may continue in the decades to come, but other systemic arrangements are possible as well and have historical precedents. This article discusses four trajectories that would lead to different setups of the international monetary system by 2040, taking into account how its hierarchical structure and the role of offshore credit money creation may evolve. In addition to a continuation of USD hegemony, we present the emergence of competing monetary blocs, the formation of an international monetary federation and the disintegration into an international monetary anarchy.

Problem of Yuan Undervaluation in US-China Trade Relations

2012 ◽  
pp. 20-28
Author(s):  
A. Polivach
Keyword(s):  
Exchange Rate ◽  
National Currency ◽  
Chinese Government ◽  
Scientific Validity ◽  
Trade Relations ◽  
China Trade ◽  
The Us ◽  
World Economic ◽  
Us Dollar ◽  
World Economic Crisis

Before the world economic crisis the Chinese government restricted the sphere of the Yuan’s circulation exceptionally by the domestic market. Basically, until that time the Yuan was not freely convertible while the Chinese foreign trade transactions were operated with the help of the US dollar. This is a sufficient reason to state that the issue of Yuan’s underestimated exchange rate has no fundamental relevance. However, the crisis forced China to substantially extend the utilization of its national currency in the international settlements. This is especially true in case of mutual settlements with the neighbor countries. So far, presumably, the issue of Yuan’s underestimated exchange rate will, at last, receive a scientific validity only when the Chinese national currency will become fully convertible and the scales of its utilization will become comparable with those of the traditional hard currencies.

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