ard for currency. Under this system, the US dollar was tied to gold by a United States government commitment to buy it at $35.00 and ounce and sell to central banks at the same price (excluding handling and other charges). Other participating countries maintained the exchange values of their currencies at prices which were almost fixed in terms of the dollar (the values fluctuate normally not more than one percent on either side of their parities), with the result that exchange rates were almost universally fixed. Other governments carried out their commitments by selling internationally acceptable liquid resources when there was an excess demand for foreign currencies in terms of their own currencies, and by buying liquid resources when there was an excess supply. What constituted internationally acceptable resources for this purpose were gold, and other liquid assets denominated in key or reserve currencies, principally US dollars or UK pounds sterling. The IMF was to ensure that these standards were being followed as well as being the lender for temporary deficits, and balance of payment problems. Each member country contributed a predefined amount, or quotas, of national currencies and gold. This quota also determines the voting power on the IMF and the amount of resources that they may draw on from the Fund. Designed to foster monetary cooperation, the IMF sought to enforce strict rules of behaviour in a world based on the gold standard and fixed currency-exchange rates. The Fund had, in theory, strict rules regarding how much to lend and when it was to be repaid. In reality, however, the Fund had discretion to waive any normal limitations. In 1961 with the advent of the General Arrangements to Borrow (GAB), the Fund increased its ability to lend through arrangements to borrow from 10 major industrial countries. At the time, these agreements had enabled the IMF to have and additional $6 billion at its disposal. The Gold Standard, in theory, functioned to limit the ability of governments to issue currency at will, hence decreasing the purchasing power of money. It existed before the Bretton Woods agreement, but was suspended for reasons that we will see later. If, for example, the US dollar were defined as equal to 1/20 of an ounce of gold, then the number of dollars that the United States could issue would be constrained by its holdings of gold reserves. Moreover, if the UK defined its currency, the pound sterling, as 5/20 of an ounce of gold, the fixed exchange rate between the US and the UK, quite obviously would be $5 USD= 1 sterling. One specific problem with specie standards (that is a currency convertible into a standardised unit of a non-monetary commodity) is that the value of money is only as valuable as the specie backing it. When worldwide gold production was low in the 1870 s and 1880 s, the money supply grew slowly, leading to a general deflation. This situation changed radically in the 1890 s following the discovery of gold in Alaska and in South Africa. The result was rapid money growth and inflation up until the outbreak of World War I. Furthermore, linking currencies to gold did not totally restrain governments from manipulating the value of their currencies. First, in order to finance expenditures by printing money, governments would frequently suspend the gold standard during times of war. Second, even without officially abandoning gold, some nations periodically redefined the value of their currencies in terms of gold. Instead of allowing for gold or foreign reserves to be consistently depleted, the countries would choose instead to devalue their currencies. It might seem, by this previous line of argument that countries had no real restrictions on their behaviour when it came to currencies, since they could devalue them at will. However, there was a serious price to pay for devaluation. Should a country threaten to devalue its currency, a speculative attack on that country s currency would surely foll

Some common words found in the essay are:
Bretton Woods, Third World, War Furthermore, Eurodollar Eurocurrency, IMF Western, World Bank, Stanley Fisher, Latin American, International Development, War II, bretton woods, exchange rates, woods system, bretton woods system, balance payments, lender resort, gold standard, fall bretton woods, international monetary, international lender, central bank, fall bretton, international lender resort, fixed exchange rates, latin american countries,
Approximate Word count = 4010
Approximate Pages = 16 (250 words per page double spaced)