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Does the Bretton Woods system have a future? Causes of the crisis of the Bretton Woods monetary system Causes of the collapse of the Bretton Woods monetary system


Bretton Woods Conference 1944. Photo: AP/TASS

Once upon a time we had a completely controversial topic, but now we will talk about very real things.

72 years ago, on July 1, 1944, a fundamental change in the world economy began, which was recorded in agreements a few days later. However, understanding of what happened came to ordinary people much later.

The world of finance has always been something of a mixture of balancing act and the magic of circus magicians. Most of its basic concepts are difficult to understand not only by ear, but are also completely arbitrary in nature. At the same time, finance is inextricably linked with money, and money has always been an instrument of power. It is not surprising that with their help, over the centuries, someone has constantly tried to take over the world.

For example, in July 1944, at the Mount Washington Hotel in the resort town of Bretton Woods (New Hampshire, USA), a group of gentlemen held a conference, the result of which was the world financial system of the same name, which marked the final victory of America over its long-standing geopolitical world rival - Great Britain. The winner got the rest of the world - or rather, almost the whole world, since the Soviet Union refused to join the new system. However, for the United States, it became only an intermediate step towards world financial hegemony, which America managed to achieve, but, apparently, it was not destined to remain on Olympus.


Stages of the long journey

The transition from subsistence farming to machine production, among other things, caused a massive increase in labor productivity, thereby creating significant commodity surpluses that local markets could no longer absorb. This pushed countries to expand foreign trade. So, for example, during the years 1800-1860, the average annual volume of Russian exports increased from 60 million to 230 million rubles, and imports - from 40 million to 210 million. But the Russian Empire did not occupy the first place in international trade. The leading positions belonged to Great Britain, France, Germany and the USA.

Such a large-scale exchange of goods could no longer fit within the narrow framework of a subsistence economy and required the widespread use of a common denominator in the form of money. This also gave rise to the problem of comparing their values ​​with each other, which ultimately led to the recognition of gold as a universal equivalent of value. Gold has played the role of money for centuries; all the “big players” had it, and coins were traditionally minted from it. But something else turned out to be more important. International trade has realized the need not only for a predictable mechanism for the value of money, but also the importance of stability in the relationship between their values.

The use of pegging national currencies to gold made it very easy to solve both problems at once. Your candy wrapper is “worth,” let’s say, one ounce (31.1 g) of gold, mine is two ounces, therefore, my candy wrapper is “equal” to two of yours. By 1867, this system had finally taken shape and was consolidated at the conference of industrialized countries in Paris. The leading world trading power of that time was Great Britain, therefore the stable exchange rate of 4.248 British pounds sterling per ounce established by it became a kind of foundation of the world financial system. Other currencies were also denominated in gold, but, inferior to the pound in terms of the share of world trade, they ultimately came to be expressed through the British pound.

However, even then the United States began its own game to overthrow British monetary hegemony. Within the framework of the Paris Monetary System, the United States achieved not only the fixation of the dollar to gold ($20.672 per ounce), but also fixed a rule according to which free trade in gold could be carried out only in two places: London and New York. And nowhere else. This is how the gold coin parity developed: 4.866 US dollars per British pound. The rates of other currencies had the right to fluctuate only within the cost of sending an amount of gold equivalent to one unit of foreign currency between gold exchanges in the UK and the USA. If they went beyond the boundaries of this corridor, an outflow of gold from the country began or, conversely, its influx, which was determined by the negative or positive balance of the national balance of payments. Thus, the system quickly returned to equilibrium.

In this form, the “gold standard” existed until the outbreak of the First World War and, in general, ensured the effectiveness of the mechanism of international finance. Although even then, Great Britain was faced with the problem of the cyclical expansion-contraction of the money supply, which was fraught with the depletion of the national gold reserve.

The Great War, as the First World War was then called, greatly shook the world economy, which could not but affect its financial system. London could no longer play the role of the world's reserve currency alone. The scale of the domestic economy simply did not generate enough gold to meet other countries' demand for British pounds, and Britain's own trade surplus remained negative. This meant the virtual bankruptcy of the British Lion, but the gentlemen from the City took a clever step and, at the international economic conference in Genoa in 1922, proposed a new standard, called the gold exchange standard. Formally, it was almost no different from the Parisian “gold”, except that the dollar was already officially recognized as an international measure of value on a par with gold. Then a little fraud began. The dollar retained its gold backing, and the pound had a rigid exchange rate peg to the dollar, although it was no longer possible to exchange it for the corresponding equivalent in gold.

Conference in Genoa in 1922. Photo: ics.purdue.edu

I will command the parade

However, the Genoese currency system did not last long. Already in 1931, Great Britain was forced to officially cancel the convertibility of the pound into gold, and the Great Depression forced America to revise the gold content of its currency from 20.65 to 35 dollars per ounce. The United States, which by that time had a positive trade balance, began active expansion into Europe. To protect against it, Britain and other leading countries introduced prohibitive customs tariffs and direct restrictions on imports. The volume of international trade and, accordingly, mutual settlements fell sharply. The exchange of currencies for gold in all countries was stopped, and by 1937 the world monetary system ceased to exist.

Unfortunately, before her death, she managed to lead US banking circles to the idea of ​​​​the possibility of seizing complete leadership in the world economy through the dollar acquiring the status of the only reserve system. And the Second World War, which devastated Europe, could not have come at a more opportune time here. If Hitler had not existed, he would have been invented in Washington.

So when on July 1, 1944, representatives of 44 countries, including the USSR, gathered at the Bretton Woods Conference to decide the financial structure of the post-war world, the United States proposed a system that was both very similar to the one that “worked well before” and at the same time time leading the world to officially recognize America's leading role. In short, she looked simple and elegant. The American dollar is strictly tied to gold (the same 35 dollars per troy ounce, or 0.88571 g per dollar). All other currencies have fixed rates to the dollar and can change them by no more than plus or minus 0.75% of this value. Apart from the dollar and the pound, not a single world currency had the right of exchange for gold.

In fact, the dollar became the only world reserve currency. The British pound retained some privileged status, but by that time more than 70% of the world's gold reserves were in the United States (21,800 tons), the dollar was used in more than 60% of international trade transactions, and Washington promised huge loans in exchange for ratification of the Bretton Woods terms to restore the economies of countries after the war. Thus, the Soviet Union was offered to allocate 6 billion dollars, which was a huge amount, since the entire volume of Lend-Lease was estimated at 11 billion. However, Stalin correctly assessed the consequences and wisely refused the offer: the Soviet Union signed the Bretton Woods agreements, but they never not ratified.

The governments of other European countries actually signed the bondage and, with the ratification of the Bretton Woods conditions, could issue exactly as much of their own money as their central banks had the world reserve currency - American dollars. This provided the United States with the broadest opportunities to control the entire world economy. This also allowed them to establish the International Monetary Fund, the World Bank and GATT - the General Agreement on Tariffs and Trade, which later became the World Trade Organization (WTO).

The world began to live under the Bretton Woods system (BWS).

Trading floor on Wall Street, USA, 1939. Photo: hudson.org

As the foreign debt of Great Britain and the United States increased year by year and soon exceeded the value of the gold reserves of these countries, and foreign governments became increasingly convinced that, by maintaining the existing international monetary system, they were forced to finance the deficits of Great Britain and the United States (whose policies they could not control and at times did not agree with it), the two above-mentioned conditions began to contradict each other.

The Bretton Woods system was well conceived but could only work effectively if the main reserve currency was stable. And this condition was ultimately not met. During the 1960s, the US balance of payments was largely in negative balance, meaning that the number of dollars held by foreigners increased rapidly as US gold reserves were depleted.

Throughout the 1960s, the dollar gradually lost its ability to be exchanged for gold, but the treaty reserve standard system allowed for at least the appearance of a gold exchange standard to be maintained. As a result, the United States managed for quite a long time to evade the need to eliminate the balance of payments deficit by changing domestic economic policy or the dollar exchange rate. Eventually, however, when the American government, instead of raising tax rates, began to increase the money supply in circulation to pay for the costs of the Vietnam War, the United States experienced a surge in inflation. As the money supply grew, interest rates fell and domestic prices skyrocketed, making American goods less competitive abroad.

The first crisis erupted in October 1960, when the price of gold on the private market quickly rose to $40 per ounce, while the official price was $35 per ounce. This crisis was followed by the gold, dollar and sterling crises. This development of events could soon result in a collapse of the entire world monetary system similar to the crash of 1931, but in reality it led to an unprecedented close cooperation of all the leading countries of the world in the field of currency and increased the willingness of countries with excess reserves to continue to finance operations to save the monetary system in period while fundamental reforms were being discussed.

Despite growing income from foreign investment, the US balance of payments surplus in trade in goods and services (including income from foreign investment), transfers and pensions, reaching $7.5 billion in 1964, gave way to a deficit of approx. $800 million in 1971. In addition, the volume of capital exports from the United States all these years remained stably at the level of 1% of the gross national product; however, while high national interest rates in the late 1960s encouraged an influx of ca. 24 billion dollars of foreign capital, then in the early 1970s low rates caused a massive dump of securities and an outflow of investment abroad.

French demarche

For all the elegance of the plan and the enormous prospects for the United States, the UAV itself contained fundamental problems that manifested themselves back in the days of the “gold standard.” While the US economy accounted for approximately a third of the global economy, and if we subtract the socialist countries, then 60% of the total economy of the West, the share of dollars issued for lending to foreign financial systems was significantly less than the money supply circulating within the United States itself. The balance of payments was positive, thereby providing America with the opportunity to continue to get rich. But as the European economy recovered, the US share began to decline, and American capital, taking advantage of the high cost of the dollar, began to actively flow abroad to buy cheap foreign assets. In addition, the profitability of foreign investments was three times higher than the profitability of the American market, which further stimulated the outflow of capital from the United States. America's trade balance gradually turned negative.

The strict restrictions on gold trade that existed in the Middle East did not help either, which actually limited its acquisition even by the central banks of other states, and generally deprived any private investors of such an opportunity. In addition, the emerging transnational corporations used their foreign capital for active stock market trading, including “against the dollar.” The growing imbalance between the theoretical BVS model and the actual state of affairs in the global economy led not only to the emergence of a black market for gold, but also brought its price there to more than $60 per troy ounce, that is, twice the official price.

It is clear that such a discrepancy could not continue for long. It is believed that the BVS was broken by French President General de Gaulle, who collected a “ship of dollars” and presented it to the United States for immediate exchange for gold. This story really happened. At a meeting with President Lyndon Johnson in 1965, de Gaulle announced that France had accumulated 1.5 billion paper dollars, which it intended to exchange for the yellow metal at the officially established rate of $35 per ounce. According to the rules, the United States had to transfer more than 1,300 tons of gold to the French. Considering that by this time no one knew the exact size of the US gold reserves, but there were persistent rumors about its reduction to 9 thousand tons, and the cost of the entire mass of printed dollars clearly exceeded the equivalent of even the official number of 21 thousand tons, America would agree to such an exchange I could not. Nevertheless, France, through severe pressure (the country withdrew from the NATO military organization), managed to overcome Washington’s resistance and, in two years, together with Germany, thus exported more than 3 thousand tons of gold from the United States.

The ability of the United States to maintain the convertibility of the dollar into gold was becoming impossible. By the beginning of the 70s. There was a redistribution of gold reserves in favor of Europe, and more and more cash and non-cash US dollars participated in international circulation. Confidence in the dollar as a reserve currency was further weakened by the huge US balance of payments deficit. The US deficit in official accounts reached unprecedented levels - $10.7 billion in 1970 and $30.5 billion in 1971, with a maximum of $49.5 billion (annualized) in the third quarter of 1971.

There were significant problems with international liquidity, as gold production was small compared to the growth in international trade. New financial centers emerged (Western Europe, Japan), and their national currencies gradually began to be used as reserve ones. This led to the US losing its absolute dominant position in the financial world.

In accordance with IMF rules, the resulting excess dollars in the private foreign exchange market had to be absorbed by foreign central banks, which was required to maintain existing currency parities. However, such actions gave rise to expectations that the dollar would depreciate relative to the stronger currencies of countries that had accumulated huge dollar claims, in particular France, West Germany and Japan. These expectations were reinforced by official statements by the US government that it viewed changes in exchange rates as a measure necessary to restore balance of payments equilibrium and the competitiveness of American goods in foreign markets. On August 15, 1971, the United States officially announced the suspension of the exchange of dollars for gold. At the same time, to strengthen its position in the upcoming negotiations, the United States introduced a temporary 10 percent surcharge on import duties. The surcharge served two purposes: to limit imports by making them more expensive, and to warn foreign governments that unless they took dramatic steps to boost U.S. exports, their own exports to the United States would be severely limited.

This is where the history of the Bretton Woods financial system ended, since after such an embarrassment the United States, under various pretexts, refused to exchange green pieces of paper for real gold. On August 15, 1971, the next US President, Richard Nixon, officially abolished the gold backing of the dollar.

Over the 27 years of its existence, BVS has done the most important thing - it has elevated the American dollar to the top of world finance and firmly associated it with the concept of independent value. That is, the value of this piece of paper was given only by what was written on it - “dollar” - and not by the amount of gold for which it could be exchanged. The abandonment of gold backing removed the last restrictions on the issue of money from the United States. Now the Fed could officially decide at its meeting how many dollars the world needed, without worrying about any kind of security.


Smithsonian Agreement.

After the statements made on August 15, those countries that had positive balances of payments that had not yet switched to floating exchange rates of their currencies were forced to do so. However, the governing monetary institutions of these countries tried to limit the appreciation of their currencies and thus maintain the competitiveness of their goods in international markets. At the same time, governments sought to avoid a return to the destructive protectionist policies that had dominated the world in 1931 after the cessation of the exchange of sterling for gold and could again become dominant now that the exchange of dollars for gold had ceased. The danger of a return to the past was eliminated with the help of agreements reached on December 18, 1971 at negotiations between representatives of the Group of Ten countries at the Smithsonian Institution (Washington).

First, the terms of a multilateral exchange rate review were agreed upon, which entailed a devaluation of the US dollar against gold by 7.89% and a simultaneous increase in the currencies of many other countries. As a result, the value of the world's leading currencies relative to the previous dollar parity increased by 7–19%. Until early 1972, many other countries did not change the currency parities fixed by the IMF; as a consequence, the value of their currencies relative to the dollar also automatically rose. Some countries have resorted to adjusting the parity of their currencies to maintain their previous exchange rate to the dollar, while others have increased or decreased the rates of their national currencies against the dollar. Secondly, the Group of Ten agreed to temporarily set the limits of permissible exchange rate fluctuations at 2.25% of the new exchange rate, which for now excluded the free “floating” of currencies. Third and finally, the United States agreed to eliminate the 10 percent surcharge on import duties.

As a result of the measures taken, the gold exchange standard was transformed into a paper-dollar standard, in which all countries, with the exception of the United States, took on risky obligations to maintain new exchange rates, which were actually enshrined in the Smithsonian Agreement.


Jamaican system

Supporters of monetarism advocated market regulation against government intervention, resurrected the ideas of automatic self-regulation of the balance of payments, and proposed introducing a regime of floating exchange rates (M. Friedman, F. Machlup, etc.). Neo-Keynesians made a turn towards the previously rejected idea of ​​J.M. Keynes about the creation of an international currency (R. Triffin, W. Martin, A. Dey. F. Peru, J. Denise). The United States has set a course for the final demonetization of gold and the creation of international liquidity in order to support the position of the dollar. Western Europe, especially France, sought to limit the hegemony of the dollar and expand IMF loans.

The search for a way out of the financial crisis took a long time, first in academic circles and then in ruling circles and numerous committees. The IMF prepared in 1972-1974. project for reform of the world monetary system.

Its structure was officially stipulated at the IMF conference in Kingston (Jamaica) in January 1976 by agreement of the IMF member countries. The Jamaican system is based on the principle of a complete rejection of the gold standard. The causes of the crisis are described in the article Bretton Woods monetary system. The rules and principles of regulation were finally formed by 1978, when a change in the IMF charter was ratified by a majority vote. Thus, the current world monetary system was created.

According to the plan, the Jamaican monetary system was supposed to become more flexible than the Bretton Woods system and adapt more quickly to the instability of balances of payments and national currency exchange rates. However, despite the approval of floating exchange rates, the dollar, formally deprived of the status of the main means of payment, actually remained in this role, which is due to the more powerful economic, scientific, technical and military potential of the United States compared to other countries.
In addition, the chronic weakness of the dollar, characteristic of the 70s, gave way to a sharp increase in its exchange rate by almost 2/3 from August 1980 to March 1985 under the influence of a number of factors.

The introduction of floating instead of fixed exchange rates in most countries (since March 1973) did not ensure their stability, despite the huge costs of foreign exchange intervention. This regime turned out to be unable to ensure a rapid equalization of balances of payments and inflation rates in various countries, to put an end to sudden movements of capital, speculation in exchange rates, etc.
A number of countries continued to peg their national currencies to other currencies: the dollar, pound, etc., some pegged their rates to “baskets of currencies,” or SDRs.

One of the main principles of the Jamaican world monetary system was the legally completed demonetarization of gold. Gold parities were abolished and the exchange of dollars for gold was stopped.

The Jamaica Agreement finally abolished gold parities of national currencies, as well as SDR units. Therefore, it was viewed in the West as the official demonetization of gold, depriving it of all monetary functions in the sphere of international circulation. The beginning was laid for the actual displacement of the “yellow metal” from international monetary relations.

Formally, the Jamaican system exists to this day, but in fact we can see the beginning of its end. Because it contains even more systemic contradictions than there were in Bretton Woods, but there is no gold in it that can even be touched and counted.

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Bretton Woods Armed Forces 1944-1978

Reasons for creation:

1. The introduction of the gold exchange standard, which was based on gold and the motto - the currency of 2 countries: the US dollar and the pound sterling. Recently, the pound sterling has lost its position in the Sun in favor of the US dollar. $35 = 1 troy ounce. This continued until 1971.

2. Exchange rates of currencies and their convertibility began to be carried out on the basis of fixed parities, expressed in US dollars. All countries were required to maintain the exchange rate of their national currency within 1% fluctuations relative to parity.

3. Creation of international monetary and credit organizations: IMF and International Bank for Reconstruction and Development.

4. The US dollar becomes the only reserve currency.

Prerequisites for appearance: The Second World War led to a deepening crisis of the Genoese monetary system. The development of a project for a new world monetary system began during the war years (in April 1943), as countries feared shocks similar to the currency crisis after the First World War and in the 30s. Anglo-American experts working since 1941 rejected the idea of ​​a return to the gold standard from the very beginning. They sought to develop the principles of a new world monetary system capable of ensuring economic growth and limiting the negative socio-economic consequences of economic crises.

BRETTON WOODS MONETARY SYSTEM - an international monetary system that was formed after the Second World War and was based on the adaptation of national currency systems to the currency systems of the leading states at that time, primarily to the US national system. The system was established as a result of the Bretton Woods Conference (July 1 to 22, 1944). The name comes from the Bretton Woods resort in New Hampshire, USA. The system gave rise to organizations such as the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).

At the UN conference in Bretton Woods (USA) in July 1944, the following were put forward: principles of the world armed forces:

  • gold was recognized as the basis of the Armed Forces;
  • the main currencies are the American dollar and the British pound sterling;
  • fixed parities of all currencies were established in relation to the dollar, and through it - to gold and other currencies, market fluctuations around fixed rates of +1% were allowed;
  • to regulate the armed forces, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) were created;
  • systems of currency restrictions were abolished, and the convertibility of national currencies was restored.

This system was characterized by the fact that it ensured a combination of national interests with international requirements: the relative independence of states in pursuing domestic policies was ensured by a system of international credit.

Historical merits of the system (advantages):

1. By the end of the 60s. The countries of the world have reached such a standard of living and volume of consumed goods that they enjoy to this day.

2. The world economy has gained experience in m/n regulation with the help of the IMF and the International Bank for Reconstruction and Development.

Reasons for the collapse (cons):

1. In 1971 The exchange of US dollars for gold was stopped.

2. Dollar hunger gave way to dollar satiety.

The crisis of the Bretton Woods monetary system. Since the late 60s, the crisis of the Bretton Woods monetary system began. Its structural principles, established in 1944, no longer correspond to the conditions of production, world trade and the changed balance of forces in the world. The essence of the crisis of the Bretton Woods system lies in the contradiction between the international, global nature of IEO and the use of national currencies subject to depreciation (mainly the dollar) for their implementation.

Causes of the crisis of the Bretton Woods monetary system.

1. The instability and contradictions of the US economy. The onset of the currency crisis in 1967 coincided with a slowdown in economic growth;

2. Increased inflation had a negative impact on world prices and the competitiveness of firms and encouraged speculative movements of “hot” money. Different rates of inflation in different countries influenced the dynamics of exchange rates, and the decrease in the purchasing power of money created conditions for “exchange rate distortions”;

3. In the 70s, speculative operations, accelerating the spontaneous movement of “hot” money between countries, aggravated the currency crisis. An excess of dollars in the form of an avalanche of “hot” money periodically fell on one country or another, causing currency shocks and flight from one currency to another;

4. Instability of national balances of payments. Chronic deficits in some countries (especially the USA, Great Britain) and positive balances in others (Germany, Japan) intensified sharp fluctuations in exchange rates;

5. The inconsistency of the principles of the Bretton Woods system with the changed balance of forces on the world stage. The monetary system, based on the use of national currencies, came into conflict with the internationalization of the world economy. This contradiction intensified as the economic positions of the United States and Great Britain weakened, which repaid the deficit of their balance of payments by issuing national currencies, using their status as reserve currencies. This was especially contrary to the interests of developing countries.

6. The role of transnational corporations (TNCs) in the foreign exchange sector: TNCs have gigantic short-term assets in different currencies, which can significantly exceed the foreign exchange reserves of the central banks of the countries where they operate. These amounts escape national control and, in pursuit of profits, they participate in currency speculation, giving it gigantic scope.

Forms of manifestation of the crisis

· Aggravation of the problem of international currency liquidity;

· “Currency rush” - massive sale of unstable currencies in anticipation of their devaluation, buying up currencies that are candidates for revaluation;

· “Gold Rush” - a flight from unstable currencies to gold, a spontaneous increase in its price;

· Sharp fluctuations in official gold and foreign exchange reserves;

· Panic on stock exchanges and falling securities prices in anticipation of changes in exchange rates;

· Activation of national and interstate currency regulation;

· Massive devaluations and revaluations of currencies (official and unofficial);

· Active foreign exchange interventions by central banks, including those coordinated between several countries;

· Use of foreign loans and borrowings from the IMF to support currencies;

· The struggle between two trends in international relations - cooperation and separate actions (even trade and currency “wars”).

The currency crisis developed in waves, hitting one country or another at different times and with different strengths. The development of the crisis of the Bretton Woods monetary system can be divided into several stages.

ü Devaluation of the pound sterling;

ü Gold rush, collapse of the gold pool, formation of a double gold market;

ü Devaluation of the French franc;

ü Revaluation of the German brand;

ü Dollar devaluation in December 1971

The US took a number of measures to save the Bretton Woods system in the 1960s:

1.Borrowing from other countries.

2. Collective defense of the dollar.

3.Doubling the IMF capital

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Bretton Woods system, Bretton Woods Agreement(eng. Bretton Woods system) - an international system for organizing monetary relations and trade settlements, established as a result of the Bretton Woods Conference, held from July 1 to July 22, 1944. Replaced the financial system based on the “gold standard”. Named after the Bretton Woods resort in New Hampshire, USA. The conference marked the beginning of such organizations as the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).

The USSR signed the agreement but did not ratify it.

In 1971-1978, the Bretton Woods system was replaced by the Jamaican Monetary System, based on free trade in currencies (free conversion of currencies).

Principles

  • The price of gold is strictly fixed - $35 per troy ounce (about 31 g).
  • Fixed exchange rates have been established for the currencies of the participating countries to the key currency (US dollar).
  • Central banks maintain a stable exchange rate of the national currency against the key currency (±1%) through foreign exchange interventions.
  • Changes in exchange rates are allowed through revaluation or devaluation.
  • The organizational units of the system are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). The IMF provides loans in foreign currency to cover balance of payments deficits and support unstable currencies, monitors compliance with the principles of operation of the currency systems of participating countries, and ensures foreign exchange cooperation.

The dollar, a currency convertible into gold, became the basis of currency parities, the predominant means of international payments, foreign exchange interventions and reserve assets. The US national currency simultaneously became world money (before the Bretton Woods system, gold was world money, while many international contracts used the British pound sterling for settlements). In fact, this led to the emergence Dollar standard international monetary system based on the dominance of the dollar. More precisely, talk about Gold dollar standard. In the mid-20th century, the United States owned 70% of the world's gold reserves.

Foreign exchange interventions were seen as a mechanism for adapting the monetary system to changing external conditions, similar to the transfer of gold reserves to regulate the balance of payments under the gold standard. Exchange rates could be changed only if there were significant imbalances in the balance of payments. It was these changes in exchange rates within the framework of fixed parities that were called revaluation And devaluation currencies

Key dates for the development of the crisis

  1. March 17, 1968. A dual gold market has been established. The price of gold in private markets is set freely according to supply and demand. According to official transactions for the central banks of countries, the convertibility of the dollar into gold remains at the official rate of 35 dollars per 1 troy ounce.
  2. August 15, 1971. US President Richard Nixon announced a temporary ban on converting the dollar into gold at the official rate for central banks.
  3. December 17, 1971. Devaluation of the dollar against gold by 7.89%. The official price of gold increased from 35 to 38 dollars per 1 troy ounce without the resumption of the exchange of dollars for gold at this rate.
  4. February 13, 1973. The dollar devalued to 42.2 dollars per 1 troy ounce.
  5. March 16, 1973. The Jamaican International Conference subjected exchange rates to the laws of the market. Since that time, exchange rates are not fixed, but change under the influence of supply and demand. The system of fixed exchange rates ceased to exist.

3.1 Factors causing the crisis

Since the late 60s, the crisis of the Bretton-Woods currency system began. Its structural principles, established in 1944, no longer correspond to the conditions of production, world trade and the changed balance of forces in the world. The essence of the Bretton-Woods crisis lies in the contradiction between the international nature of the IEO and the use of national currencies subject to depreciation (mainly the dollar) for their implementation.

The causes of the crisis of the Bretton-Woods monetary system can be represented as a chain of interdependent factors.

Instability and contradictions of the economy. The onset of the currency crisis in 1967 coincided with a slowdown in economic growth. The global cyclical crisis gripped the Western economy in 1969-1970, 1974-1975, 1979-1983.

Increased inflation had a negative impact on world prices and the competitiveness of firms and encouraged speculative movements of “hot” money. Different rates of inflation in different countries influenced the dynamics of exchange rates, and the decrease in the purchasing power of money created conditions for “exchange rate distortions.”

Instability of balances of payments. The chronic deficit of the balance sheets of some countries (especially Great Britain, the USA) and the surplus of others (Germany, Japan) intensified sharp fluctuations in exchange rates, downwards and upwards, respectively.

The discrepancy between the principles of the Bretton-Woods system and the changed balance of forces on the world stage. The monetary system, based on the international use of national currencies subject to depreciation - the dollar and partly the pound sterling, came into conflict with the internationalization of the world economy. This contradiction between the Bretton and Woods system intensified as the economic positions of the United States and Great Britain weakened, which repaid the deficit of their balance of payments with national currencies, abusing their status as reserve currencies. As a result, the stability of reserve currencies was undermined.

The right of holders of dollar holdings to exchange them for gold came into conflict with the ability of the United States to fulfill this obligation. Their external short-term debt increased by 8.5 times over 1949-1971, and official gold reserves decreased by 2.4 times. The consequence of the American policy of “deficits without tears” was the erosion of confidence in the dollar. The official price of gold, which served as the basis for gold and currency parities, was lowered in the interests of the United States, and began to deviate sharply from the market price. Interstate regulation of this price turned out to be powerless. As a result, artificial gold parities lost their meaning. This contradiction was aggravated by the persistent refusal of the United States until 1971 to devalue its currency. The regime of fixed parities and exchange rates aggravated “exchange distortions.” In accordance with the Bretton-Woods agreement, central banks were forced to carry out currency intervention using the dollar, even to the detriment of national interests. Thus, the United States shifted the responsibility of maintaining the dollar exchange rate to other countries, which aggravated interstate contradictions. Since the IMF Charter allowed only one-time devaluations and revaluations, in anticipation of them, the movement of “hot” money and the speculative game to reduce the exchange rate of weak currencies and to increase the exchange rate of strong currencies intensified. Interstate currency regulation through the IMF turned out to be almost ineffective. Its loans were insufficient to cover even temporary balance of payments deficits and support currencies.

The principle of American-centrism, on which the Bretton-Woods system was based, ceased to correspond to the new balance of power with the emergence of three world centers: the USA - Western Europe - Japan. The US's use of the dollar's status as a reserve currency to expand its foreign economic and military-political expansion and export inflation increased interstate disagreements and contradicted the interests of developing countries.

Activation of the Eurodollar market. As the United States covers its balance of payments deficit with its domestic currency, some dollars move to foreign banks, contributing to the development of the Eurodollar market. This colossal market of dollars “without a homeland” ($750 billion, or 80% of the volume of the European market, in 1981 versus $2 billion in 1960) played a dual role in the development of the Bretton-Woods system crisis. At first, it supported the position of the American currency, absorbing excess dollars, but in the 70s, Eurodollar transactions, accelerating the spontaneous movement of “hot” money between countries, aggravated the currency crisis.

The disorganizing role of transnational corporations (TNCs) in the foreign exchange sphere: TNCs have gigantic short-term assets in different currencies, which are more than double the foreign exchange reserves of central banks, elude national control and, in the pursuit of profits, engage in currency speculation, giving it a grand scale. In addition to the general reasons, there were specific ones inherent in individual stages of the development of the Bretton-Woods system crisis.

Forms of manifestation of the crisis of the Bretton-Woods monetary system.

“currency fever” - the movement of “hot” money, the massive sale of unstable currencies in anticipation of their devaluation and the purchase of currencies that are candidates for revaluation;

“gold rush” - a flight from unstable currencies to gold and a periodic increase in its price;

panic on stock exchanges and falling securities prices in anticipation of changes in exchange rates;

worsening of the problem of international currency liquidity, especially its quality;

massive devaluations and revaluations of currencies (official and unofficial);

active foreign exchange intervention by central banks, including collective intervention;

sharp fluctuations in official gold and foreign exchange reserves;

the use of foreign loans and borrowings from the IMF to support currencies;

violation of the structural principles of the Bretton-Woods system;

activation of national and interstate currency regulation; strengthening of two trends in international economic and monetary relations - cooperation and contradictions, which periodically develop into trade and currency wars.

Stages of crisis development.

The currency crisis developed in waves, hitting one country or another at different times and with different strengths. The development of the Bretton-Woods monetary system crisis can be divided into several stages.

Devaluation of the pound sterling.

Due to the deterioration of the country's monetary and economic situation, on November 18, 1967, the gold content and the exchange rate of the pound sterling were reduced by 14.3%. Following the UK, 25 countries, mostly its trading partners, devalued their currencies in varying proportions.

Gold rush, collapse of the gold pool, formation of a double gold market.

Owners of dollars began to sell them for gold. The volume of transactions on the London gold market increased from its usual value of 5-6 tons per day to 65-200 tons (November 22-23, 1967), and the price of gold increased to $41, with the official price of $35 per day. ounce Bouts of gold fever led to the collapse of the gold pool in March 1968 and the formation of a dual gold market.

Devaluation of the French franc. The detonator of the currency crisis was currency speculation - a game to lower the exchange rate of the franc and increase the exchange rate of the German mark in anticipation of its revaluation. The advance of the mark on the franc was accompanied by political pressure from Bonn on Paris and the outflow of capital from France, mainly to Germany, which caused a reduction in the country's official gold and foreign exchange reserves (from $6.6 billion in May 1968 to 2.6 billion in August 1969). Despite the currency intervention of the Bank of France, the franc fell to the lowest acceptable limit. Turbulent political events in France, the resignation of Charles de Gaulle, and the refusal of Germany to revalue the mark increased pressure on the franc. On August 8, 1969, the gold content and the franc exchange rate were reduced by 11.1% (foreign exchange rates against the franc increased by 12.5%). At the same time, the currencies of 13 countries on the African continent and Madagascar were devalued.

Revaluation of the German stamp.

On October 24, 1969, the mark rate was increased by 9.3% (from 4 to 3.66 marks per $1) and the floating exchange rate regime was abolished. The revaluation was a concession by Germany to international financial capital: it contributed to the improvement of the balance of payments of its partners, since their currencies were actually devalued. The outflow of “hot” money from Germany replenished the foreign exchange reserves of these countries. For 20 months there was relative calm in the foreign exchange markets, but the causes of the currency crisis were not eliminated.

Dollar devaluation in December 1971.

The Bretton-Woods crisis reached its climax in the spring and summer of 1971, when the main reserve currency was at its epicenter. The dollar crisis coincided with a long depression in the United States following the economic crisis of 1969-1970. Under the influence of inflation, the purchasing power of the dollar fell by 2/3 in mid-1971 compared to 1934, when its gold parity was established. The total US current account deficit was $71.7 billion for 1949-1971. The country's short-term external debt increased from 7.6 billion dollars in 1949 to 64.3 billion in 1971, exceeding by 6.3 times the official gold reserve, which decreased during this period from 24.6 billion to $10.2 billion

The crisis of the American currency was expressed in the mass sale of it for gold and stable currencies, and a fall in the exchange rate. Uncontrollably roaming Eurodollars flooded the currency markets of Western Europe and Japan. The central banks of these countries were forced to buy them to maintain the exchange rates of their currencies within the limits established by the IMF. The dollar crisis caused a political form of protests by countries (especially France) against the privilege of the United States, which covered the balance of payments deficit with the national currency. France exchanged $3.5 billion for gold at the US Treasury in 1967-1969. Since the late 60s, the conversion of the dollar into gold has become a fiction: in 1970, 50 billion dollar holdings of non-residents were countered by only 11 billion dollars of official gold reserves. The US took a number of measures to save the Bretton Woods system in the 60s.

Attracting foreign exchange resources from other countries. Dollar balances were partially transformed into direct loans. Swap agreements were concluded ($2.3 billion in 1965, $11.3 billion in 1970) between the Federal Reserve Bank of New York and a number of foreign central banks. Short-term bonds of Ruz were placed in Western European countries.

Collective defense of the dollar. Under US pressure, the central banks of most countries refrained from exchanging their dollar reserves for gold in the US Treasury. The IMF invested part of its gold reserves in dollars, contrary to the Charter. Leading central banks created the gold pool (1962) to support the price of gold, and after its collapse, they introduced a dual gold market on March 17, 1968.

Doubling the IMF capital (up to $28 billion) and a general agreement between 10 member countries of the Fund and Switzerland on loans to the Fund ($6 billion), issuing SDRs in 1970 in order to cover the balance of payments deficit.

The United States stubbornly resisted the overdue devaluation of the dollar and insisted on revaluing the currencies of its trading partners. In May 1971, the Swiss franc and the Austrian schilling were revalued and a floating exchange rate was introduced for the currencies of Germany and the Netherlands, which led to an actual depreciation of the dollar by 6-8%. The hidden devaluation suited the United States, since it did not have such a detrimental effect on the prestige of the reserve currency as the official one. To break the resistance of trading rivals, the United States switched to a policy of protectionism. On August 15, 1971, emergency measures were announced to save the dollar: the exchange of dollars for gold for foreign central banks (the “gold embargo”) was stopped, and an additional 10% import duty was introduced. The United States has embarked on the path of a trade and currency war. The influx of dollars into Western European countries and Japan caused a massive transition to floating exchange rates and thereby a speculative attack on the dollar by their strengthened currencies. France introduced a dual currency market following the example of Belgium, where it had operated since 1952. Western European countries began to openly oppose the privileged position of the dollar in the world monetary system.

The search for a way out of the currency crisis ended in a compromise Washington Agreement of the Group of Ten on December 18, 1971. An agreement was reached on the following points:

devaluation of the dollar by 7.89% and an increase in the official price of gold by 8.57% (from 35 to 38 dollars per ounce);

revaluation of a number of currencies;

expanding the limits of exchange rate fluctuations from +/-1 to +/-2.25% of their parities and establishing central rates instead of currency parities;

abolition of the 10% customs duty in the USA.

But the United States did not commit to restoring the convertibility of the dollar into gold and participating in foreign exchange intervention. Thus, they preserved the privileged status of the dollar, which is now not materially supported.

The dollar devaluation law was signed by President Richard Nixon on April 3 and approved by Congress on April 26, 1972. The increase in the price of gold was legalized after the new dollar parity was registered with the IMF and notified to member countries on May 8, 1972. It should be noted that the time lag between the period making a decision to change the official exchange rate and its legal registration was of practical importance for international settlements, since the implementation of protective clauses took into account the normative act. The devaluation of the dollar caused a chain reaction: by the end of 1971, 96 of the 118 IMF member countries had established a new exchange rate to the dollar, and the rate of 50 currencies was increased to varying degrees. Taking into account the varying degrees of appreciation of the currencies of other countries and their share in US foreign trade, the weighted average value of the dollar devaluation was 10-12%.

Dollar devaluation in February 1973.

The Washington Agreement temporarily smoothed over the differences, but did not eliminate them. In the summer of 1972, a floating exchange rate for the pound sterling was introduced, which meant its actual devaluation by 6-8%. This complicated the UK's relationship with the EEC, as it violated the Common Market agreement (dated April 24, 1972) to narrow the limits of exchange rate fluctuations to +/-1.125%. The UK was forced to compensate the owners of sterling holdings and introduce a dollar and, from April 1974, a multi-currency clause as a guarantee of maintaining their value. Foreign exchange restrictions were strengthened to curb capital flight abroad. The pound sterling has lost its reserve currency status.

In February-March 1973, a currency crisis hit the dollar again. The impetus was the instability of the Italian lira, which led to the introduction of a dual currency market in Italy (from January 22, 1973 to March 22, 1974), following the example of Belgium and France. The "gold rush" and the rise in the market price of gold once again exposed the weakness of the dollar. However, unlike 1971, the United States failed to achieve a revaluation of the currencies of Western Europe and Japan. On February 12, 1973, the dollar was devalued again by 10% and the official price of gold was increased by 11.1% (from 38 to 42.22 dollars per ounce). The massive sale of dollars led to the closure of leading foreign exchange markets (from March 2 to March 19). The new consensus - the transition to floating exchange rates from March 1973 - corrected the "exchange distortions" and relieved tension in the foreign exchange markets.

The six Common Market countries have abolished the outer limits of agreed fluctuations in the exchange rates of their currencies (the “tunnel”) against the dollar and other currencies. The decoupling of the “European currency snake” from the dollar led to the emergence of a kind of currency zone led by the German mark. This indicated the formation of a Western European zone of monetary stability as opposed to the unstable dollar, which accelerated the collapse of the Bretton-Woods system.

The interweaving of the currency crisis with the energy and global economic crisis.

The rise in oil prices at the end of 1973 led to an increase in the current account deficits of industrialized countries. The currencies of Western Europe and Japan fell sharply. There was a temporary appreciation of the dollar, as the United States was better endowed with energy resources than its competitors, and the positive impact of its two devaluations on the country's balance of payments became apparent, although not immediately. The currency crisis intertwined with the global economic crisis in 1974-1975, which increased fluctuations in exchange rates (up to 20% per year in the late 70s). The dollar fell throughout the 70s, with the exception of short periods of its appreciation. By covering the current account deficit with the national currency, the United States contributed to the pumping of dollars into international circulation (8.9 billion in 1950, 292.5 in 1980). As a result, other countries became “reluctant creditors” to the United States. In the 19th century England used a similar monetary and financial method, taking advantage of the privileged position of the pound sterling in international monetary relations.

3.2 Features and socio-economic consequences of the crisis of the Bretton Woods monetary system

Between the currency crises of 1929-1933. and 1967-1976 there are certain similarities. These structural crises of the world monetary system affected all countries, became protracted and led to a violation of its principles. However, the Bretton-Woods crisis has a number of features.

The interweaving of cyclical and special currency crises. The crisis of the Bretton-Woods currency system was combined not only with global economic crises, but also with periodic revival and recovery of the economy.

The active role of TNCs in the development of the currency crisis. TNCs concentrated 40% of industrial production, 60% of foreign trade, 80% of the developed technology of the West. Large foreign exchange assets and the scale of Eurocurrency, especially Eurodollar, operations of TNCs gave the Bretton-Woods crisis enormous scope and depth.

The disorganizing role of the United States. Using the dollar's privileged position as a reserve currency to cover its balance of payments deficit, the United States flooded the countries of Western Europe and Japan with dollars, causing disruptions in their economies, increased inflation, and currency instability, which deepened interstate contradictions.

The emergence of three centers of power. The structural principles of the Bretton Woods system, established during the period of undivided US dominance, no longer correspond to the new balance of power in the world. Western European countries, especially the EU, are creating their own center of monetary power to counter the hegemony of the dollar, and Japan is using the yen as a reserve currency in the Asian region.

The wave-like development of the currency crisis, as evidenced by the stages of its development discussed above.

Massive devaluations of currencies and periodic revaluations of individual currencies. Comparison of the devaluations of the 60-70s and 1949 allows us to identify their differences in the following indicators:

A. scale: in 1967-1973. repeated devaluations affected hundreds of currencies (compared to 37 in 1949), including the dollar, the reserve currency, twice;

B. size: in the 60-70s, the size of devaluations (on average 8-15%) was significantly less than in 1949 (up to 30.5%) and after the First World War (up to 80%). The predominance of small devaluations without a margin of safety is due to countries' fear of causing a chain reaction due to the increased internationalization of economic relations;

B. duration: in the 60-70s, devaluations lasted for a number of years, as in the 30s, and in 1949 this event was carried out almost simultaneously in 37 countries;

D. procedure for carrying out: devaluations are carried out not only legally, but also actually in connection with revaluation in conditions of floating exchange rates. And in 1949, during the period of post-war devastation, the question of revaluation was not even raised and the regime of fixed exchange rates prevailed.

The structural nature of the crisis of the world monetary system. With the collapse of the Bretton-Woods system, its structural principles were abolished: the exchange of dollars for gold was stopped, the official price of gold and gold parities were abolished, interstate payments in gold were stopped, a floating exchange rate regime was introduced, the dollar and pound sterling officially lost their status as reserve currencies. The German mark and the Japanese yen began to assume this role. They began to use the original forms of world credit money - SDR, ECU.

The influence of state currency regulation. On the one hand, it contributes to the aggravation of contradictions in the monetary sphere; on the other hand, regulation at the national and interstate levels in order to mitigate the consequences of the currency crisis and find a way out of it through currency reform.

The currency crisis, disorganizing the economy, complicating foreign trade, increasing the instability of currencies, gives rise to severe socio-economic consequences. This is manifested in increased unemployment, wage freezes, and rising prices. Revaluation is accompanied by a decrease in employment in export industries, and devaluation, making imports more expensive, contributes to rising prices in the country. The centrifugal tendency, reflecting interstate disagreements, is opposed by the tendency towards monetary cooperation.

When World War II was ending and its outcome was clear, another invisible front was raging - financial. It was then that events occurred that glorified the small town of Bretton Woods, until then better known as a ski resort. It was here that a system was formed that operates within a number of states called the free world.

How did it all begin?

Before moving on to the main topic of the article, let's look at what preceded its emergence. Each international monetary system is a special type of agreement that prescribes the rules of the current interstate commodity and money turnover. This approach is needed to bring national monetary units to a certain common denominator and establish a standard of material value. This approach eliminates confusion when calculating imports and exports. The first attempt to restore order was the emergence of the Paris Monetary System. Although in fact it simply legally consolidated the situation that existed at the time of its formation. That is, gold acted as the universal standard. Because of this, the Paris system is often called the monetary-metallic system. It did not matter what attributes the gold coins whose profiles and coats of arms were minted on it had. Attention was paid only to weight. This system functioned quite successfully, although it was not without flaws. So, it was not easy to pay with bars and gold coins.

In addition, natural wear and tear occurred, and means of payment simply wore out. In addition, constantly carrying a bag of gold with you was dangerous and inconvenient. Also, such an approach was unprofitable, because countries that had mines and deposits quickly became rich. At the same time, their level of development did not matter. Moreover, transporting significant sums by sea was a hectic business. Therefore, drafts and bills gradually became increasingly popular. The Paris system collapsed during the roar of the guns of the First World War. Then countries began to carry out unlimited emission of paper substitutes that were already familiar at that time. This problem needed to be solved. And it was planned to achieve this goal with the help of the Genoese currency system. It involved the introduction of gold backing for the currencies used. There were fluctuations in exchange rates, but this approach made it possible to stabilize and streamline calculations and the situation in the markets. This system existed until the end of World War II. An interesting fact: during its creation, the United States limited itself to the role of an observer, while the USSR took the chance to declare the first proletarian state. By the way, you can often hear opinions that the Paris and Genoa systems were better than the Bretton Woods system, and that everything should be different. Alas, if you look at the specialized economic literature, which contains many indicators, you will find out that they were inconvenient given the rapidly growing population, as well as the significant growth in production then observed.

How was the Bretton Woods world monetary system created?

It did not arise out of nowhere. It was initiated by the US business elite, which sought world hegemony after the war. At the time the proposal was made, the American economy was at its peak. The World War allowed the flywheel of domestic production to spin up, which was further assisted by Roosevelt's reforms. Thus, by 1939, the consequences of the Great Depression had been practically overcome, military orders contributed to the revitalization of industry, and food shortages on the European continent (sometimes reaching famine) had a positive impact on agriculture. In other words, there was every reason to lay claim to the role of world leader. The Bretton Woods financial system was supposed to consolidate the status quo for decades. The International Monetary Fund was originally created. It started its activities in 1947. Its founders included 44 states, but only the United States could act as a financial donor. Soon, many states lined up to receive loans to improve the economic situation in the country. Like any adequate creditor, the IMF demanded that the borrowed funds be repaid. And for this it is necessary that they be spent effectively. If difficulties arose, additional loans were provided to avoid a collapse of the national currency and default. Therefore, careful monitoring of the economic situation in the countries was introduced. In order to unify the interaction process, it was decided that it was necessary for the Bretton Woods world monetary system to be based on certain principles. The most important of these was the gold dollar standard.

About the principles


Stability of exchange rates is an extremely important condition for the functioning of the market. And the principles of the Bretton Woods monetary system took this fact into account. The only stable monetary unit at that time, sufficiently backed by yellow metal, belonged to the United States. For a dollar you could get 0.89 grams of gold at any time. Although the system itself proclaimed that it was a gold-currency system, in fact it was a gold-dollar system. American means of payment received the status of world money only after the war. Initially there weren't very many of them. For comparison: in the reserves of other countries they were only 1/10, while gold was ½, and the pound sterling of the British Empire was 4/10. But soon the dollar gained the leading position. This was facilitated by many factors, among which the most important role was played by good macroeconomic indicators and large gold reserves (three-quarters of the world's total). In addition, an impressive positive foreign trade balance, as well as the hegemony of American goods in the world, also contributed. All this contributed to the fact that the principles of the Bretton Woods system were accepted and enshrined in a number of documents. They looked like this:

  1. The price of gold is strictly fixed and was thirty-five dollars per troy ounce.
  2. Fixed exchange rates of all participating countries to the US dollar (the key currency) were established.
  3. Changes in established indicators through devaluation or revaluation were allowed.
  4. Central banks had to maintain a stable exchange rate of national funds through foreign exchange interventions.
  5. The organizational links of the created system were identified - the previously mentioned IMF and the International Bank for Reconstruction and Development.

What opportunities did this create?

Initially about changing rates. If devaluation was carried out, it was usually seen as a symptom of the unfavorable economic situation and led to an increase in the price of imported goods. But exports became more profitable. So this was a definite plus. Another positive point is the receipt of quick money. Thus, internal costs are reduced, and a symbol arises to produce goods here, and not where the currency is expensive. As a natural result, the volume of foreign investment is growing. This point was well understood. Therefore, not only the stick in the form of the possibility of refusing loans and other sanction measures was actively used, but also the carrot, which manifested itself in the form of a willingness to come to the rescue.

What's the point here? The Bretton Woods system assumed that when a country receives a loan, it undertakes to maintain the exchange rate of the currency. At the same time, it was established that fluctuations should not exceed one percent of the ratio established through the gold standard to the US dollar. In exceptional cases, it was allowed to increase the value of this figure to 10%. But if this threshold was exceeded, sanctions awaited the culprit. Foreign exchange interventions were used to regulate the exchange rate. To implement them, dollars were needed. The Federal Reserve was very willing to sell them. This is how the Bretton Woods system worked in its early years. In the second half of the forties, bright prospects opened up for the United States. The world was short of food, hygiene products, clothes, clothes and much more. Industrialized states lay in ruins. Since the early fifties, the economies of European countries began to grow rapidly.

What did this lead to?


The Bretton Woods system is based on significant US dominance. And, accordingly, without it its functioning would be problematic. But the behavior of the States was contradictory and unpredictable. One can recall the Marshall Plan, which contributed to the rise of European economies. It should be noted that it was a forced measure. On the one hand, it contributed to the growth of competitors. On the other hand, the impoverishment of the broad masses could lead to pro-Stalinist forces coming to power in a number of countries, and in a democratic, peaceful way. The US could not allow this to happen.

Despite the growth of European economies, the dollar confidently maintained its leading position. The boundless trust backed by gold seemed unshakable. At the same time, costs have also increased. In 1949, the People's Republic of China emerged. A year later, the Korean War broke out. A large number of volunteers from socialist countries took part in it. They were armed with high-quality and numerous Soviet equipment. Formally, they were opposed by the joint forces of the UN, but in fact the main burden lay on the United States. The fall in foreign trade turnover and the increase in expenditure items forced the Federal Reserve System to launch the printing press at full speed. Thus began the crisis of the Bretton Woods monetary system. At the same time, the improvement in the economic situation of a number of countries contributed to the emergence of a need to regulate exchange rates. The main tool for this was currency interventions. If it was necessary to strengthen the national currency, then a large number of dollars were thrown onto the market. If necessary, they were bought to weaken it. To a greater extent, devaluation met the interests of the countries, which is why it was implemented. The development of foreign exchange markets, increased capital flows and many other factors clearly indicated that the crisis of the Bretton Woods system would soon flare up with significant force. The first alarm bell appeared in 1965.

French incident


Financial analysts simply could not help but notice that a large amount of cash dollars are being put into circulation and exported abroad, and the economic situation in the United States is not very rosy. And the first sign in 1965 was the so-called French incident. De Gaulle, who served as president, remembered that the Bretton Woods system guaranteed the exchange of dollars for gold at a rate of $35 per gram. At that time France had simply astronomical gold and foreign exchange reserves. Namely, a third of a billion. It was not the best moment for the USA. The space race was underway, and the dirty, difficult and extremely expensive Vietnam War was ongoing. The Ministry of Finance tried to hint that exchanging such a sum was an unfriendly step. But De Gaulle was adamant. Dollars were exchanged. Soon, student unrest began in France, which resulted in a full-scale uprising. De Gaulle lost the presidency. Rumor has it that the United States had a hand in this as retaliation for such an act. But nothing could be changed. This is the beginning of the end. The crisis of the Bretton Woods system has begun.

What happened next?

As the US trade surplus declined, confidence in its currency declined. To smooth out the emerging contradictions, the IMF decided to create a special monetary unit - special drawing rights. It did not have gold backing, although formally it was equal in value to the dollar. This currency surrogate was used to carry out mutual settlements of debts between the central banks of countries that were members of the IMF. The crisis of the established system began to gain momentum. If all countries with dollar reserves began to demand gold, there would simply not be enough of it. In 1971, the agreement began to break down. All the circumstances suggested that we should expect an imminent devaluation of the dollar. West Germany, Holland and Belgium were the first to fail. These countries have introduced a floating exchange rate. It was determined by supply and demand in the foreign exchange markets.

Japan held out the longest - until September 1971. Since in fact the dollar could no longer be exchanged for gold, the concept of the “dollar standard” was introduced. There was a devaluation and the rate per troy ounce rose to $38. The gold standard Bretton Woods monetary system began to burst at the seams. It was clear that this figure was very arbitrary, and this was far from the end. And this was indeed the case - in 1972, an ounce of gold began to cost over $42. In the 70s, the Jamaican system took shape, which did not provide for parities and standards. Then all existing currencies were divided into three groups: hard, conditionally convertible and free. The Jamaican system gave rise to a situation that was very well described by one of the economists: ungrown wheat is sold for unprinted money. Now this is the situation that dominates throughout the world. Of course, if someone wants to buy gold, it is quite possible. But only at market prices.

What led to its collapse?


The Bretton Woods economic system was not perfect. Increased inflation affected the competitiveness of firms, as well as world prices. All this encouraged speculative movements of money. Different inflation affected the dynamics of exchange rates, which created distortions. The instability of balances of payments, which manifested itself in the form of chronic deficits (Great Britain, USA) or surpluses (Japan, Germany), only intensified sharp fluctuations. Also, the principles of the Bretton Woods world system ran counter to the development of the whole world. After all, inflation-prone national currencies were used as the basis for it. Initially, they tried to solve this problem by involving Great Britain and establishing the pound sterling as a reserve reserve currency. But as the British Empire and the United States weakened, abuses emerged by these states, which took advantage of the status they received and used the printing press to cover deficits. The stability of reserve currencies was undermined.

Moreover, the right of holders of dollar bills conflicted with the ability of the United States to fulfill its obligations. Over two decades (1949-1971), their short-term debt increased by 8.5 times, while gold reserves decreased by 2.4. The US policy of “deficits without tears” undermined confidence in the dollar. The official price of gold, lowered in the interests of the United States, suddenly began to deviate sharply from the existing market situation. Interstate regulations did not help. Artificial gold parities were losing their meaning. Until 1971, the United States stubbornly refused to change course. All this only aggravated the distortions. The Bretton Woods exchange rate system led to central banks having to intervene even at the expense of national interests. That is, the United States shifted the responsibility of maintaining the established dollar exchange rate to other countries, which led to an aggravation of interstate contradictions. Due to existing restrictions on devaluation and revaluation, speculative activity has intensified. Weak currencies were predicted to decline, while strong currencies were predicted to rise. Regulation through the IMF has borne virtually no fruit. His loans did not allow him to cover even temporary deficits and support national currencies.

Final stage of operation


The American-centrism that formed the basis of the Bretton Woods system did not correspond to the three world centers united by it: Japan - Western Europe - the USA. The use of the dollar as a reserve currency for military-political and foreign economic expansion, the export of inflation and a number of other negative factors only intensified international contradictions. Initially, this resulted in the development of the Eurodollar market, which initially supported the system by absorbing excess funds. But in the 70s he exacerbated the crisis. Transnational corporations also played a role. These entities hold short-term assets that are more than double the reserves of central banks. Moreover, they can easily escape national control. Therefore, when participating in currency speculation, they can give it a grand scale.

In addition, the devaluation of the pound sterling in November 1967 also contributed to the fall of the system. And this currency, as we remember, was second after the dollar. And one day, November 18, gold security was reduced by 14.3%. Following Britain, another 25 countries (usually its trading partners) devalued their currencies in varying proportions. This launched a process that remains in history under the name “Collapse of the Golden Bloc.” After the devaluation began, the volume of transactions in the gold market increased. If in London they usually traded 5-6 tons per day, then on November 22-23 these figures reached 65-200 thousand kilograms! At the same time, the price of gold increased to $41 per troy ounce. And this despite the fact that officially it was at $35. The gold rush led to the collapse of the gold market in March 1968 and the formation of a dual market.

Conclusion


So the essence of the Bretton Woods monetary system was examined. This agreement played its role and lost its meaning. The Bretton Woods exchange rate system was the last link before the formation of our current financial situation. Despite many voices about fragility and calls to go back, for now it still exists and works without significant disruption.