Question

weaknesses of bretton woods system​

Answer 1

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The Bretton Woods system of monetary system management created the rules for the commercial and financial relations among the world’s major developing nations. Until the early 1970s, the Bretton Woods system was effective in maintaining the standard or fixed exchange rates for the leading nations that had created it, especially the United Nations. Due to this fixed exchange rate, countries experienced balance of payments deficit. This leads to increase in the respective currency in the foreign exchange market. Hence, affects the exchange value of that currency. The Central banks had to act at this time and failure to which might create a financial crisis as it happened in the year 1956-58. French Franc crisis and problems of British pound were the examples. The currencies of the respective nations when they were devalued to correct the payment imbalances. Thus the delayed adjustment of the parties to change in the economic environment of the countries was the weakest point of Bretton Woods Agreement. This led to a lack of trust and strike at the foundation of guesswork.Another considerable problem was that one national currency had to be an international reserve currency at that time. This made the national monetary and economic policy of the United States liberated from external fiscal pressures, while greatly influencing those foreign economies.

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Answer 2

The weaknesses of the Bretton Woods System which were identified by the Committee as bringing in certain form of monetary systems with adjustments and liquidity for the nations of the world

Explanation:

• There was representation from forty four countries for creating a framework  for a monetary system for the world which was considered to be effective and worth full
• The committee met in Bretton Woods  to formulate on a  system of monetary investments and free trading among the nations of the world.  Since the conditions of the world had become very chaotic and disturbed because of the wars .
• The countries with deficit in balance of payments would be given the preference of international liquidity to sort out their deficits

To know more about balance of payment

Define the balance of payment explain the needs and objective balance of payment

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