The Bretton Woods system is a financial exchange standard based on dollar and gold. Its essence is to establish an international monetary system centered on the US dollar. Its basic contents include that the US dollar is linked to gold, and other countries' currencies are linked to the US dollar, and a fixed exchange rate system is implemented. The operation of the Bretton Woods monetary system is closely related to the credibility and status of the US dollar.
Reasons for the collapse of Bretton Woods system
1. Defects of the system itself. The fundamental reason for the collapse of the dollar-centered international monetary system is the inevitable contradiction in the system itself. Under this system, the US dollar, as a means of international payment and international reserve, plays the role of the world currency.
On the one hand, the US dollar, as a means of international payment and international reserve, requires a stable value of the US dollar in order to be generally accepted by other countries in international payment. The stability of the dollar requires not only that the United States has enough gold reserves, but also that the international balance of payments of the United States must maintain a surplus, so that gold will continue to flow into the United States and increase its gold reserves. Otherwise, people are reluctant to accept dollars in international payments.
On the other hand, if the world wants to obtain sufficient foreign exchange reserves, it also needs the United States to maintain a large balance of payments deficit, otherwise the world will face a shortage of foreign exchange reserves and international payment means in international circulation channels. However, as the US deficit increases, the gold security of the US dollar will continue to decrease and the US dollar will continue to depreciate. After the Second World War, it was the inevitable result of the development of this contradiction from the shortage of dollars to the flood of dollars.
2. The dollar crisis and the American economic crisis broke out frequently. The capitalist world economy is changing, and the dollar crisis is the direct cause of the collapse of the Bretton Woods system.
(1) US gold reserves decrease. 1950 The United States launched the Korean War, which led to a substantial increase in overseas military spending, a deficit in international payments for years, and a continuous outflow of gold reserves. 1960, the gold reserves of the United States fell to178 billion dollars, which was not enough to cover the current debt of 2103 billion dollars at that time, and the dollar crisis appeared for the first time. In the mid-1960 s, the United States was involved in the Vietnam War, the balance of payments further deteriorated, and the gold reserves continued to decrease. 1in March, 1968, the US gold reserve had dropped to 12 1 billion, while the foreign short-term debt in the same period was 3.31billion, which triggered the second dollar crisis. By 197 1, America's gold reserves (102 1 billion dollars) are only 15.05% of its external current liabilities (67.8 billion dollars). At this time, the United States has completely lost its ability to accept the exchange of dollars for gold. As a result, President Nixon had to announce on August1971KLOC-0/5 that he would stop the obligation to exchange US dollars for gold. 1973 The worst economic crisis broke out in the United States, and the gold reserve has dropped from $24.56 billion in the early postwar period to110 billion. The lack of sufficient gold reserves as a basis has seriously shaken the credibility of the dollar.
(2) inflation in the United States has intensified. When the United States launched the war of aggression against Vietnam, the fiscal deficit was huge and it had to be made up by issuing currency, which led to inflation. Coupled with two oil crises, oil prices rose and expenditures increased; At the same time, due to the increase of unemployment subsidies and the decline of labor productivity, government expenditure has increased sharply. The US consumer price index 1960 1.6%, 1970 rose to 5.9%, and 1 1% in 1974, which had a huge impact on the US dollar exchange rate.
(3) The US balance of payments continues to be in deficit. At the end of World War II, the United States took advantage of its expanded economic strength and the opportunity of other countries being weakened by the war to export commodities to Western Europe, Japan and other parts of the world on a large scale, resulting in a huge surplus in the balance of payments of the United States, and a large amount of gold reserves from other countries flowed into the United States. Countries generally feel the "dollar shortage". With the economic growth and expansion of export trade in western European countries, their balance of payments has changed from deficit to surplus, and the reserves of US dollars and gold have increased. Due to the American foreign expansion and war of aggression, the balance of payments turned from surplus to deficit, and American funds flowed out in large quantities, forming a "dollar gap." This makes the US dollar exchange rate under great impact and pressure, and constantly fluctuates downwards.