Bretton Woods , New Hampshire 1944-1959

The Bretton Woods Conference took place in July 1944, but did not become operative until 1959, when all the European currencies became convertible. Under this system, the IMF and the IBRD were established. The IMF was developed as a permanent international body. The summary of agreements states, "The nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties." The IBRD was created to speed up post-war reconstruction, to aid political stability, and to foster peace. This was to be fulfilled through the establishment of programs for reconstruction and development.

The main terms of this agreement were:

1.Formation of the IMF and the IBRD (presently part of the World Bank).
2.Adjustably pegged foreign exchange market rate system: The exchange rates were fixed, with the provision of changing them if necessary.
3.Currencies were required to be convertible for trade related and other current account transactions. The governments, however, had the power to regulate ostentatious capital flows.
4.As it was possible that exchange rates thus established might not be favourable to a country's balance of payments position, the governments had the power to revise them by up to 10%.
5.All member countries were required to subscribe to the IMF's capital.
[edit] Encouraging open marketsThe seminal idea behind the Bretton Woods Conference was the notion of open markets. In Henry Morgenthau's farewell remarks at the conference, he stated that the establishment of the IMF and the World Bank marked the end of economic nationalism. This meant countries would maintain their national interest, but trade blocks and economic spheres of influence would no longer be their means. The second idea behind the Bretton Woods Conference was joint management of the Western political-economic order. Meaning that the foremost industrial democratic nations must lower barriers to trade and the movement of capital, in addition to their responsibility to govern the system.

[edit] The Bank for International Settlements controversyIn the last stages of the Second World War, in 1944 at the Bretton Woods Conference, the Bank for International Settlements became the crux of a fight that broke out when the Norwegian delegation put forth evidence that the BIS was guilty of war crimes and put forth a motion to dissolve the bank; the Americans, specifically President Franklin Delano Roosevelt and Henry Morgenthau, supported this motion. This resulted in a fight between, on one side, several European nations, the American and the Norwegian delegation, led by Henry Morgenthau and Harry Dexter White; and on the other side, the British delegation, headed by John Maynard Keynes and Chase Bank representative Dean Acheson, who tried to veto the dissolution of the bank.

The problem was that the BIS, formed in 1930, had as the main proponents of its establishment the then Governor of the Bank of England, Montagu Norman, and his colleague Hjalmar Schacht, later Adolf Hitler's finance minister. The Bank was as far as known, originally primarily intended to facilitate money transfers arising from settling an obligation from the peace treaty after WWI. After World