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Agreements of Bretton-Woods

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  1. Presentation of the Credit Agricole
    1. History
    2. Economic and competitive environment
  2. Analysis of credit management
    1. The analysis of credit risks
    2. The decisions to grant credit
  3. Summary and Recommendations

In 1943, the English and the Americans were planning to rebuild the international monetary system. A monetary conference of the United Nations was convened on July 1, 1944 at Bretton Woods, a small town in New Hampshire. Some 45 powers were represented, including the Soviet Union that attended the conference as an observer. The British delegation was led by J. M. Keynes, while the United States was represented by its Treasury official H. White, and France was represented by P. Mendes.

The basics of understanding between different countries were numerous: to allow the resumption of international trade, they recognized the need to remove exchange controls for currencies to move freely from one country to another and it was a must to ensure exchange rate stability by maintaining fixed exchange rates. Thus, the problem was to link the currency to a world standard of values, stable and accepted by all. However, all rejected the idea of a return to the gold standard as it was before 1914, partly because it would have to equitably distribute the gold stock all over the world as countries were now totally free. One needed to find a new standard of value. It was primarily this issue that was to oppose the two main opposing arguments: that of Keynes and that of White.

The international monetary system is a set of mechanisms and rules to ensure the relationship between currencies and thus allows the development of trade between countries. These rules result either of an international agreement or a state of affairs as in the case of the gold standard. Thus, with the rise of international trade in the nineteenth century (first and foremost in Britain), there was the need for an international monetary system. Therefore, from 1850, the system of the gold standard (Gold Specie Standard) was being set up in Europe and North America. This system was characterized by internal and external movement of gold, and convertibility of national currencies into gold. International payments were made either in gold or foreign currency (Pound Sterling).

Indeed, until 1914, the British Pound was the currency of international trade. It was the first universal role of the importance of British trade (related to the Industrial Revolution that started earlier) and the excellent organization of the London banks whose branches covered the entire planet with a very dense network. But that system collapsed with the First World War, resulting in forced currency bank notes, that is to say the notes inconvertible into gold, but also the abandonment of the gold standard in internationally. Between the wars, again arose the problem of finding a new global monetary equilibrium.

The Bretton Woods convention established a system of fixed exchange governed by two principles: stability and currency convertibility. In addition, they created two international organizations such as the International Monetary Fund, whose goal is to ensure compliance with the rules established by the Bretton Woods and the International Bank for Reconstruction and Development. In conclusion, in the Bretton Woods system, the metal will always be the baseline for parity and have ultimate currency conversion, but the dollar still has an important role to play.

Tags: Bretton Woods; International Monetary Fund; International Bank for Reconstruction and Development

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