The Bretton Woods System

The topic in this article outlines two things. One is an important element of the Bretton Woods system and the second is an explanation as "built-in liberalism" of Ruggie's Bretton Woods system and how successful he is. The Bretton Woods regime is widely known as the international monetary system and prospered from the end of World War II until the early 1970s. After the end of World War II the international currency framework was needed to promote trade and economy; growth and stability was important.

Following the Bretton Woods Agreement in 1944, the currency management of the Bretton Woods System enacted regulations for commerce and financial relations between the United States, Canada, Western Europe, Australia, and Japan. The Bretton Woods scheme is the first example of a fully agreed monetary policy designed to manage monetary relations between independent countries. The main feature of the Bretton Woods system is the obligation to adopt monetary policy to keep foreign exchange rate within 1% by linking the currency to money and filling the imbalance between temporary payment of the IMF is. Furthermore, it is necessary to tackle the lack of cooperation among other countries and prevention of devaluation due to currency competition.

The main reason why the Bretton Woods system collapsed is that the inflation monetary policy is not suitable for the major currency countries of the system. The Bretton Woods system is based on rules, the most important of which is to follow financial and fiscal policies consistent with civil servants. The United States violated this rule after 1965. This has become a privilege seemingly aspiring to the US to abandon. Overrated currencies and sustained trade deficit are good for American consumers, but it is painful for producers. The accumulation of reserves over the past 20 years is closely related to the surge in the US current account deficit. Imports are growing more rapidly than exports and the number of new jobs in export industries is insufficient to absorb workers driven to intensifying foreign competition. Tariffs can not solve this problem. The gap of the current account is a product of the basic financial flow and the import tax raises the dollar only in a destructive way only.