Consequences Of The Bretton Woods

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Register to read the introduction… Firstly, the essay will explain what the hegemonic stability theory is. Secondly, this essay will expose how did the United States failed to engage their hegemonic role because it acted according to its own interest. Finally, it will conclude that the end of the Bretton Woods system was in fact as a result the of growing cost that hegemony meant to the United …show more content…
The United States had many advantages when it came to the monetary and security relations between itself and Western Europe. By only printing money, the United States was able to spend much more than it actually had for many domestic programs such as the Great Society, and could also fund the Vietnam War. The costs of those programs could not weaken the dollar against the value of gold, because it was a fixed exchange rate (Balaam, Dillam 2011). Its status as reserve currency transmitter, evidently, permitted the United States to live far from its economic possibilities: it could import foreign goods, acquired foreign companies, embark on foreign military adventures, everything at the same time (Eichengreen 2005). The United States export its inflation (an oversupply of dollars) through the monetary system to its allies, because the United States was permitted to continue spending and running a deficit in its balance of payments. The more the United States spent, the more its allies complained of the U.S privileges (Balaam, Dillam 2011). According to Fred Block the United Sates rearmament policy was not without costs. In many ways it interfered with the achievement of a multilateral world economy. The weakening of the forces in the United States that favored liberalization resulted as a consequence of domestic rearmament. The strong domestic …show more content…
The United State was driven by its domestic agenda to protect its industries. The United States authorities had to face a growing currency crisis. This currency crisis not only exposed the dollar and the U.S economy, it threatened the whole Breton Woods System. The speculative pressures that attacked the dollar in the late 1960’s were a decisively factor to the August 1971 decision by the Nixon administration to make the dollar nonconvertible to gold (Wood 2005). This decision was majorly made to prevent a domestic

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