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Why Did the Bretton Woods Economic System End

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Although Keynes and White had many disagreements pertaining to the details of the new economic system, they both agreed what the system would not be – another Gold Standard. Because the United States had the largest gold reserve at the time, White argued that gold should still play a role in the new system. Keynes was not totally on board with the idea at first, but both men agreed that exchange rates should be fixed to some type of currency, which would probably be backed or valued according to gold. <ref> Conway, p. 124</ref> The men primarily sought to create a system that stabilized and corrected international currency imbalances to avoid what happened during the Great Depression. Such a system would, they believed, limit the speculation of currency and mitigate or eliminate the chance of a currency war. <ref> Best, p. 389</ref> The problem, though, was creating a plan that the United States Congress would accept.
Since Congress would only accept a plan where gold played an important role, the Bretton Woods System had to be written in a way that made it look like a modified gold standard. The final result of the Bretton Woods Conference created a system that did indeed have some elements of the Classical Gold Standard, but was certainly a twentieth century idea. The U.S. dollar became the currency all other currencies were anchored to and dollars were convertible into gold by trading partners at $35 an ounce. Unlike the Classical Gold Standard, though, individuals could not redeem dollars for gold at local banks. The IMF would provide loans on a short term to countries experiencing deficits. In order to create even more global economic security, countries could only devalue their currencies with IMF permission and reasonable notice was required. <ref> Rickards, James. <i>Currency Wars: The Making of the Next Global Crisis.</i> (New York: Portfolio/Penguin, 2012), pgs. 78-79</ref> The final result was that the Bretton Woods system was essentially a modified gold standard where the international flow of capital was more tightly regulated. The plan passed overwhelmingly by Congress and became law in the United States in July 1945. <ref> Conway, p. 301</ref>
===The End of the Bretton Woods System===

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