When and why did the Bretton Woods system collapse?

(I) Causes of the collapse of the Bretton Woods system

1. Flaws in the system itself. The fundamental reason for the collapse of the international monetary system centered on the dollar. It is that the system itself has an insoluble contradiction. In this system, the dollar as a means of international payment and international reserves, playing the function of the world's currency.

On the one hand, the dollar as a means of international payment and international reserve means, the dollar requires currency stability, in order to be generally accepted by other countries in the international payment. The stability of the dollar, not only requires the United States to have enough gold reserves, but also requires the United States balance of payments must remain in surplus, so that the gold flow into the United States and increase its gold reserves. Otherwise, people will be reluctant to accept the dollar in international payments.

On the other hand, the world to obtain sufficient foreign exchange reserves, and requires the United States to maintain a large deficit in the balance of payments, otherwise the world will face a shortage of foreign exchange reserves, the international circulation channels appear to be a shortage of international means of payment. But as the United States deficit increases, the dollar's gold guarantee and will continue to decrease, the dollar will continue to depreciate. After the second world war from the shortage of dollars to the dollar flood, is the inevitable result of the development of this contradiction.

2. The dollar crisis and the frequent outbreak of economic crisis in the United States. Capitalist world economy this and that, the dollar crisis is the direct cause of the collapse of the Bretton Woods system.

(1) The reduction of the U.S. gold reserves. The United States launched the Korean War in 1950, a huge increase in overseas military expenditures, the balance of payments deficit for many years, the gold reserves source outflow. In 1960, the United States of America's gold reserves fell to 17.8 billion U.S. dollars, has been insufficient to offset the current debt of 21.03 billion U.S. dollars, the first crisis of the dollar. 60's, the United States of America involved in the Vietnam War, the balance of payments further deterioration, the gold reserves continue to decrease. 1968 March, the United States of America's gold reserves has fallen to 12.1 billion U.S. dollars, while the same period of short-term foreign liabilities of 33.1 billion dollars, triggering the second dollar crisis, the United States of America's gold reserves. 33.1 billion dollars, triggering the second dollar crisis. To 1971, the United States of America's gold reserves (10.21 billion dollars) is only its foreign current liabilities (67.8 billion dollars) of 15.05%. At this time the United States has completely lost the ability to bear the dollar foreign exchange gold. So, President Nixon had to be announced on August 15, 1971 to stop the obligation to bear the dollar for gold. 1973 the United States broke out in the most serious economic crisis, the gold reserves from the early post-war period of 24.56 billion U.S. dollars fell to 11 billion U.S. dollars.'' The lack of adequate gold reserves as a foundation has seriously shaken the credibility of the dollar.

(2) Increased inflation in the United States. The United States launched the invasion of Vietnam war, the fiscal deficit is huge, had to rely on the issuance of currency to make up for, resulting in inflation. Coupled with the two oil crises, oil prices and increased spending; at the same time, due to increased unemployment subsidies. Labor productivity decline, resulting in a sharp increase in government spending. The U.S. consumer price index in 1960 for 1.6%, rose to 5.9% in 1970, rose to 11% in 1974, which brought a huge impact on the exchange value of the dollar.

(3) the U.S. balance of payments continued deficit. At the end of the Second World War, the United States in the war in the expansion of economic strength and other countries were weakened by the war, the opportunity to Western Europe, Japan and around the world to export commodities, so that the United States of America's balance of payments continued to show a huge surplus, the gold reserves of other countries flowed into a large number of the United States. Countries generally feel "dollar shortage" (Dollar Shortage). With the economic growth of Western European countries, the expansion of export trade, its balance of payments from deficit to surplus, the dollar and gold reserves increased. The United States due to foreign expansion and wars of aggression, the balance of payments from surplus to deficit, the United States capital outflow, the formation of "dollar surplus" (Dollar Gult). This makes the dollar exchange rate to bear a huge impact and pressure, and constantly appear downward fluctuations.

(2) the collapse of the Bretton Woods system

1. the dollar stopped exchanging gold. 1971 July the seventh dollar crisis broke out, the Nixon government announced on August 15, the implementation of the "new economic policy", to stop the implementation of foreign governments or central banks can be used to exchange the dollar to the United States of America's obligation to exchange gold one. This meant that the dollar was decoupled from gold. This means that the dollar and gold decoupling, supporting the international monetary system, one of the two pillars has collapsed.

2. cancel the fixed exchange rate system. in March 1973, western Europe and the sale of the dollar, the rush to buy gold and the mark of the trend. March 16, Europe *** with the market 9 countries held a meeting in Paris and reached an agreement, the Federal Republic of Germany, France, and other countries of the dollar to implement the "joint float", and each other to implement the fixed exchange rate. Fixed exchange rate. The United Kingdom, Italy, Ireland to implement a separate float, not to participate in the *** with the float for the time being. In addition, other major Western currencies also implemented floating exchange rates against the dollar. At this point, the fixed exchange rate system, another pillar supporting the international monetary system in the post-war period, also collapsed completely. This announced the final dissolution of the Bretton Woods system.

2. The EU central bank to implement the unified ~ monetary policy and member states to retain the fiscal policy of the contradiction, coordination is very difficult, after the implementation of a unified currency, in order to maintain the stability of the euro, the EU central bank to implement a unified monetary policy, but the member states still retains the right to implement their own fiscal policy, when the two contradictions, conflict of interest in a very large, the two relations between the coordination of the balance of the relationship between them is very difficult to achieve. Like the Bretton Woods monetary system, there is a Triffin problem, the euro's internal mechanism is difficult to overcome the inherent contradictions.

3. EU enlargement, the implementation of the euro is bound to exacerbate the contradiction with developing countries

The implementation of a unified currency in Europe is bound to further unleash the potential economic power of the unified market in Europe, the EU member states of the trade relations between the EU member states will be closer, the external competitiveness of the improvement of the European Union, which undoubtedly strengthened in the European protectionism, exclusiveness rise, and will intensify the openness of developing countries into The difficulty of this market, which not only aggravates the competition and contradiction with developed countries, but also deepens the contradiction with developing countries, and even resisted by developing countries. Hope to help you Hope to adopt Thank you