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THE BRETTOK WOODS AGREEMENTS

by
Karl R. Bopp

American Statistical Association
Philadelphia Chapter
Christian Association Building
36th and Locust Streets
6:30 P.M.
December 1, 1944




M THE BRBTTQiN WOODS AGhEEMENTS

I.

The pattern of post-war international relations
Dumbarton Oaks; General Assembly of United Nations
1«

Security Council - political

2.

Economic and Social Council - coordinating body
A.
B.
C.
D.
E.

II*

UNfthA
Food and Agriculture
International Trade Body
International Monetary Fund
International Bank for Reconstruction and
Development

International finance - Bretton Woods
1.

The atmosphere of Bretton Woods
A.

Fundamental agreement on
a.

Prosperity has no fixed limits - the
more other nations enjoy the more each
nation will have for itself.

b.

Prosperity, like peace, is indivisible.
- Poverty wherever it exists threatens
all - cannot be localized.

8«

Disagreements on details of plans at the
outset but recognition of necessity to
give and take.




_

9

_

No one completely satisfied; but dis­
satisfaction equitably distributed.
i
.

Major financial tasks
A.

B.
III.

To establish and maintain an orderly
system of international currency re­
lationships
To revive international investment

The International monetary Fund
1.

Purpose: to establish a reasonably stable
standard of international exchange to v.' i h
nc
all countries can adhere without sacrificing
the freedom of action necessary to meet
their internal economic problems.

2.

Nature of ]roblems to be solved:
disequilibria in international payments
A.

Fundamental disequilibrium
a.

Affects all countries

b.

Solutions are
(1) Restrictions
(*) Change in internal value
0 ) Change in external value

B.

Temporary disequilibrium
a.

Origin - New Zealand illustration - Nash

 b. Remedies


(1) Depreciate

(2) Restrict purchases to available
exchange
(3) Provide tempoiary funds
The "solutions" adopted in the intervvar period
A.

Competitive exchange depreciation

B.

Multiple currency systems

C.

Bilateral clearing agreements

D.

Exchange controls, quotas, etc.

Major current proposals
A.

Ahe International Monetary tuna - nistory

B.

Key-country approach

Principles of the International Monetary F u c
'ni
A.

Stable but

not rigid exchange rates

a.

Guarantee of gold value of the Fund

b.

Reduction and eventup.1 elimination of
exchange restrictions
(1) Report after 3 years
Consent to continue after 5 years

c.

Pool or fund to tide over emergencies




-

u -

(1) iiach member contributes an amount
(quota) to a common pool.
25% of quota or 10% of holdings
in gold.
Remainder in local currency.
(2) Each uiember has limited access to
the pool; limitations (a)
(b)
(c)
(d)
(e)
(f)

25% of quota per year
200% of quota total
Repurchases
Uses
Charges - distribution of income
Declaring ineligible

6 . Management
"
A.

Voting - 250 +
B
$100,000

B.

Board of governors

C.

Executive directors - at least 12
5
2
5
2

D.
7.

-

appointed by largest quota members
nonappointing American republics
other nonappointing members
largest "creditors" after 2 years

Managing director

The key-country approach

Diverse proposals



- not clear cut

_

í;

_

Principles
a.

Initial Unitea ¡States-United Kingdom
agreement on steriin^/aollar rate.
Otner currencies linkin' to one or
the other.

b.

Large (S5 billion) ¿rant-in-aia or
¿ift or loan to Gr-at Britain.
Aid to others as they aaopt policies
v e consiaer appropriate.
i

'ities ana differences between the two
'oaches

À.

Similarities
a.

b.

Dollar-sterling rate curcial.

c.

Chief responsibility and authority to
major countries.

d.
B.

Success of both depenas upon reduction
in trade barriers and sound internal
financial ana economic policies.

Provide stabilization credits.

Dissimilarities
a.

Hole of small nations.

b.

Fund discourages, key-country encourages
formation of blocks




- 6 -

3
.

Fund l a p t . e for nonmembers of
is l-c
blocks.

d. - Key currency on a product basis
j
,
Wheat:

U.S., Canaaa, Argentina,
Australia

e.

Fund agreement by technicians of
44 nations.
Continues war partnership.

f.

IV,

Fund prepares for crises wherever ana
whenever they occur.

The International Bank for Reconstruction and
Development
1.

Purposes
A.

2.

To promote international lending

Powers
A.
B.
C.

Promote private* international loans
Guarantee loans
Make loans out of own resources