Bretton Woods and the World Debt Crisis
1. The Bretton Woods institutions were developed near the end of W.W. II to help countries that were greatly affected by the war. The three institutions that were created in New Hampshire by the economic leaders of various countries were: The International Monetary Fund, The World Bank, and The General Agreement on Tariffs and Trade, which later developed into the World Trade Organization. The I.M.F was created so that countries could exchange their currency for other currencies with little restriction on the trade. This organization also helps countries that are facing high debts by giving them loans. The World Bank was established to help European countries destroyed by the war. The only country to receive any money for the war however was Holland. After that, The World Bank focused mainly on giving out loans similar to the I.M.F. The GATT was created with the idea that countries could negotiate their policy on trade. They wanted to create an institution that would regulate free trade between countries. Some countries did not like the idea that an organization could control what they do with other countries. Consequently in 1995 the World Trade Organization was established. The organization can judge if member countries are not
Because of this, the poor countries did not have the money to pay back their loans. This means that the governments of debtor countries had to decrease the expenditures on social programs. Consequently they had to declare that they could no longer exchange U. F or World Bank would not agree did give them loans and make them pay what they owe these banks. The phrase the rich get richer and the poor get poorer can be used to classify how the world economy is working at the moment. The organizations that were lending out all this money responded by extending the scheduled repayment of the debtor countries and by giving out more short-term loans to nations that were in a financial crisis. Countries like Africa had to destroy their environment to produce these materials. This meant that money could not be exchanged for anything anymore and it became unsecured means of exchange. By having their debt eliminated, poorer countries could spend their money on things like health care and education. Countries with an exceeding amount of debt meant there that economies meant nothing to other wealthier countries. The Bretton Woods meeting established the idea that countries would exchange their currency for U. This solution the World Bank came up with was to just lend out more money. I think the only good solution that helps poor countries reduce their debt is by making their debt disappear.
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