From Bretton Woods to World Inflation

February 7, 1945

Secretary Morgenthau is reported to have told a news conference that if the advice in the recent report of the American Bankers Association were followed, “the chances are it would kill the whole Bretton Woods Monetary Agreement.” He hopes, he added, that in the final analysis bankers will see “just a little further than their own immediate business.”

These comments imply that Treasury officials will take an all-or-nothing attitude before Congress regarding the Bretton Woods Agreements. It may be doubted, in view of the serious objections to the proposed International Monetary Fund, whether this position will be wise. For if, in order to save the Fund, the attempt is made to tie it indissolubly to the proposed International Bank, the result may merely be that the proposed Bank itself will be rejected along with the proposed Fund. Such an outcome would be doubly unfortunate, for the desirable objectives of the Fund, without its dangers, can be better secured through the Bank. Certainly each proposal should be considered on its own merits.

It would be regrettable, also, if any attempt were made to dismiss the position of the American Bankers Association on the ground that it reflected merely the selfish interests of bankers as such. The authors of this report are entitled to be credited with the same public spirit that animated the Treasury officials who helped to frame the Bretton Woods plan. The attribution of selfish or narrow personal motives would tend to lower the whole tone of debate and to prevent the objective consideration that the Bretton Woods plan, and every sincere criticism of it, ought to receive.

Secretary Morgenthau then declared: “It has been proved...that people in the international banking business cannot run successfully foreign exchange markets. It is up to the Governments to do it. We propose to do this if and when the legislative bodies approve Bretton Woods.” Thus, though one of the clearly stated objectives of the Fund in its official text is “the elimination of foreign-exchange restrictions,” President Roosevelt’s Treasury Secretary announced his determination not only to impose such restrictions, but to allow no one to import or export or to draw funds to travel abroad without the government’s consent.