The International Monetary Fund For World War II

The Gold Standard was the framework by which the value of cash was characterized in terms of gold, for which the money could be traded. The Gold Standard ended up being deserted in the Depression of the 1930s. Friedman felt that,“The gold standard is not feasible because the mythology and beliefs required to make it effective do not exist. This conclusion is supported not only by the general historical evidence referred to but also by the specific experience of the United States” ( “The Gold Standard:Please Stop”).Economists who contradict the Gold Standard may perceive what must be accomplished with a specific end goal to make a centrally controlled paper standard better than a decentralized Gold Standard. Milton Friedman poses the key question: "How can we establish a monetary system that is stable, free from irresponsible tinkering, and

This essay analyses the origins of the Second World War by briefly summarizing the events from 1919-1939. However, most emphasis is put on the amount of responsibility the Treaty of Versailles deserves for the outbreak of war. Other than analysing the Treaty of Versailles on its own, it also analyses the effects of the 1929 Wall Street Crash on the world, the rise of Fascism and Nazism, as well as the rise of Adolf Hitler, the failure of the League of Nations and the appeasement of the Fascist and Nazi regimes by Britain and France throughout the 1930s. Hence the Treaty of Versailles plays a

To discuss its historic background I will concentrate on the Bretton Woods System. Bretton Woods System is an international currency system started form 1944 July at the end of the Second World War. This system require each country to obey the rule that they tied its currency to gold in order to keep the exchange rate stable and prevent the currencies from devaluation. The establishment of this system ensure the resume and development of capitalist world economy especially America. Although this system ultimately disintegrated in 1973, it still make significant contributions to America’s irreplaceable role today.

With the onset of the war, the stability of the relationship between Britain, France, and Germany – which the Gold Standard was dependent on – crippled (lecture, 10/13). During the interwar period, 1914-1945, the lack of coordination between economies led to a liquidity shortage while the nations held a floating exchange rate. The interwar period saw a breakdown in international monetary coordination – proving that a floating economy was doomed for failure (FLB 264). Outside of the lack of international coordination, the Gold Standard had other downfalls leading to its demise. For example, national governments had no authority to stimulate their country’s economies in times of need. Moreover, the fixed economy limits foreign trade, hurting the country’s industries (lecture,

Post-World War I was a time for reevaluation: of alliances, of war tactics, and of what it meant to be a part of humanity. The so-called Great War left people around the world feeling exhausted, disgusted1, and yet stubborn in the desire for just compensation for their losses2. The United States found itself in a peculiar position born of Wilsonian neutrality ideals and immense war debts from the Allies; foreign policy decisions were entrenched in an internal battle between isolationists and internationalists3. While the 1920s are often said to have been dominated by the isolationists, perhaps American leadership through economic manipulation played larger role than it has been given credit4. The United States was not an isolationist nation after WWI, and its economic foreign policy decisions had global consequences.

After World War II, the Bretton Woods Agreement established the gold standard and two support institutions called the International Monetary Fund (IMF) and the World Bank. This would lead to a shift, away from the gold standard, to more relaxed systems. The idea of currency purely backed by gold was slowly being shifted to a trust based currency. These institutions purpose was to regulate the economies by injecting or taking money in a process called sterilization. Sterilization is to protect certain countries from a going bankrupt. If a country goes bankrupt, it chain a chain reaction of bankruptcies. So, in order to maintain balance, currencies need to be stable enough, so that it can be in debt without having to declare bankruptcy. The idea is

Ever since the Bretton Woods agreement in 1944, the U.S dollar became the world’s currency. Bretton Woods agreement was basically an agreement on which every country currency would be back up by the dollar, due to the fact that after WWII United States was the only one with the biggest gold reserve in the world. Although it was proposed as a good idea it had its flaws for one even though it help the U.S and other countries there was simply not enough gold to continue backing up the dollar value. Which lead to President Richard Nixon to abolish the gold standard economy. His abolish of a gold standard economy lead to a new proposal on which the dollar would be back by.

Germany emerged from World War I with huge debts incurred to finance a costly war for almost five years. The treasury was empty, the currency was losing value, and Germany needed to pay its war debts and the huge reparations bill imposed on it by the Treaty of Versailles, which officially ended the war. The treaty also deprived Germany of territory, natural resources, and even ships, trains, and factory equipment. Germany’s population was undernourished and contained many widows, orphans, and disabled veterans living in poverty. The new German government struggled to deal with these crises, which had produced a serious hyperinflation.

America at home: By the end of 1945, war induced prosperity launched the United States into an era of unprecedented economic growth. Pent up demand after years of wartime mobilization made Americans eager to spend. Over the next two years, the GDP tripled, benefiting a wider segment of society than anyone would have dreamed possible in the dark days of the Depression. American global supremacy rested in part on economic institutions created at a United Nations conference at Bretton Woods, New Hampshire, in July 1944. The International Bank for Reconstruction and Development (known commonly as the World Bank) provided private loans for the reconstruction of war-torn Europe as well as for the development of Third World countries. A second institution, the International Monetary Fund (IMF), was set up to stabilize the value of currencies and provide a predictable monetary environment for trade, with the U.S dollar serving as the benchmark for other currencies. The United States dominated the World Bank and the IMF because it contributed the most capital and the strongest currency. In 1947, multinational trade negotiations resulted in the General Agreement on Tariffs and Trade (GATT), which led to the establishment of an international body to oversee trade rules and practices. The

At the end of World War Two, the Bretton Woods system was established for world currencies. This system involved countries fixing their currencies to the US Dollar, which in turn was tied to the value of gold at a fixed exchange rate of $35 per ounce. As this was a fixed exchange rate system it effectively forced countries to pursue a certain monetary policy, in order to keep their currency pegged to the Dollar and in turn the value of gold.

Eight decades has elapsed since the outbreak of the Great Depression, but the continuing mystery of its cause keep provoking academic debates among scholars from various fields. Eichengreen and Temin joint the debates by linking the gold-standard ideology with the cause of the Great Depression. They content that because of this ideology monetary and fiscal authorities implemented deflationary policies when the hindsight shows clearly that expansionary policies were needed. And these contractionary policies consequently pushed the stumbling world economy into the Great Depression. Eichengreen and Temin put heavy weight on analyzing why the prewar gold standard could be a force for international financial stability while interwar gold

participants in this conference created three organizations to help regulate the international economy. The first is the International Monetary Fund (IMF) which was established with the idea of regulating monetary policy. One of the benchmarks of the IMF is the stabilization of exchange rates and the loaning of money to help stabilize countries with balance of payments deficits. The second organization established was the General Agreement on Tariffs and Trade (GATT) whose main focus was on a liberal trading order.

The Bretton Woods Conference in 1944 spawned two IFIs, the International Monetary Fund (IMF) and the World Bank, in order to rebuild a

Here the International Monetary Fund and the International Bank for Reconstruction and Development, later divided into the World Bank and Bank for International Settlement, were established. To regulate the international policy economy these institutions become known as the Bretton Woods institutions and became operational in 1946. The IMF, founded to stabilize countries' currencies in relation to each other, holds money in trust, which member countries can borrow according to terms set by the institution. The World Bank instead gives more long-term loans and sells bonds to corporations and governments, which bind the issuer to pay the bondholder the amount of the loan plus interest. However, the countries taking advantage of the opportunity to borrow money to improve their affected economy are obliged to launch a set of policies, known as the Washington Consensus, which was first presented in 1989. The reforms introduced by the Institute for International Economics include "deregulation, privatization, currency devaluation, social spending cuts, lower corporate taxes, export driven strategies, and removal of foreign investment restrictions" . More, "these loans are only granted when the countries agree to the adoption to a comprehensive programme of macro-economic stabilization and structural economic reform."

1. The gold standard and the money supply. Under the gold standard all national governments promised to follow the “rules of the game”. This meant defending a fixed exchange rate. What did this promise imply about a country’s money supply? A country’s money supply was limited to the amount of gold held by its central bank or treasury. For example, if a country had 1,000,000 ounces of gold and its fixed rate of exchange was 100 local currency units per ounce of gold, that country could have 100,000,000 local currency units outstanding. Any change in its holdings of