What Percentage Of Currency Devaluation Was Allowed By The Imf In The Bretton Woods Agreement
Why a dollar? The United States held three-quarters of the world`s gold shipments. No other currency had enough gold to replace it. The dollar was 1/35 of an ounce of gold. Bretton Woods has allowed the world to slowly move from a gold standard to a U.S. dollar standard. On 27 August 1967, after a G-10 meeting in London, the United States and France reached the closest agreement on international monetary reforms. Representatives of the United States and France expressed satisfaction with the new monetary reform formula that will be submitted to IMF governors for approval at the 1967 annual meetings in Rio. The main points of the new proposal were twofold. First, a Special Drawing Rights (SDR) system has been developed as an emergency plan to address potential global liquidity bottlenecks. Second, the Ministers agreed that decisions on the period, date, amount and allocation of special drawing rights to a country in need would require a majority of 85% of the total votes of a meeting of IMF governors, thereby giving the common market countries veto rights (17% of total voting rights at the IMF).
This proposal corresponded to the multilateral surveillance power advocated by France. The level and persistence of U.S. balance-of-payments deficits was of particular concern to France in the 1960s. The conventional view of French grievances is strictly due to nationalist political considerations based on the observation that the United States has a deficit in its balance of capital and that American companies invest heavily in Western Europe. Thus, it is claimed, the French government was thwarted by an international monetary regime that allowed the United States to expand its influence in Europe with more military bases and increased control of American investors in French industry. As long as the U.S. government was able to finance its balance-of-payments deficit by issuing dollars that would automatically retain their trading partners as reserves, the U.S. power would expand.
For this reason, the challenge posed by General de Gaulle`s government in the 1960s to the gold and dollar standard is seen by proponents of the traditional view as proof that French international monetary policy was primarily followed by nationalist political diktats. In November, representatives of the G-10 countries conducted secret negotiations in support of the pound sterling. It has been reported that France was the only country in this group not to strongly oppose the devaluation of its own currency if Britain decided to devalue the pound 33/ (Tanner, November 25, 1967). After a day marked by a gold rush on the Paris Stock Exchange, the British currency officially depreciated by 14.3% (from 2.80 to 2.40 dollars) on 18 November. In the 19th and early 20th centuries, gold played a key role in international financial transactions. The gold standard has been used to support currencies; The international value of the currency has been determined by its stable relationship with gold; Gold has been used to settle international accounts. The gold standard maintained fixed exchange rates, which were considered desirable, as they reduced the risk associated with trade with other countries. The Bretton Woods countries have decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a solid pool of national currencies and gold, which would be held by the IMF. Each member country of the Bretton Woods system then had the right to borrow as part of its dues, which it needed. The IMF was also responsible for implementing the Bretton Woods agreement. The plan was drawn up by Mr.
Hervé Alphand and Mr. André Istel with the help of other senior officials of the French Ministry of Finance.