From Bretton Woods to World Inflation

February 15, 1945

The New York State Bankers Association publishes today a sixty-two-page report on the Bretton Woods proposals prepared by its committee on international monetary matters, a group consisting of the heads of half a dozen of the leading New York City banks and of several up-State institutions. It is an important analysis, impressively argued, and comes to substantially the same conclusions as the recent report of the American Bankers Association. It holds that the proposed International Bank should be accepted with certain minor changes, but that action on the proposed International Fund should be postponed. It also urges repeal of the Johnson Act, American readiness to cooperate with Britain on the latter’s financial problems, and reduction of obstacles to international trade.

The New York State Bankers conclude that the Fund is not a suitable instrumentality for dealing with the tasks that lie immediately ahead. They regard its system of credits based upon quotas as unrealistic and impractical. Another doubt as to the feasibility of the Fund arises from the lack of agreement on the interpretation of its provisions. Some of their broader conclusions follow:

The immediate task is to restore political and economic order to the world. International peace and security, internal stability in each country, and the removal of international trade barriers are the basic problems that demand attention. The establishment of the Fund prior to the restoration of favorable underlying conditions would not result in the achievement of economic stability or the elimination of exchange controls. On the contrary, we believe the Fund would tend to perpetuate exchange controls and other restrictions on the free movement of trade.

The greatest single contribution that the United States can make to world stability is to maintain the integrity of the American dollar. This can be done only by the maintenance of the fixed value of the dollar in terms of gold and the attainment as soon as practicable of a sound national budget and other sound internal policies. The adoption of a trade policy greatly reducing restrictions on United States imports would also contribute to world stability.

These conclusions emerge from a careful report the whole text of which merits serious study. The New York State Bankers point out that the proposed International Bank, with some additional authority, could accomplish nearly all the desired objectives of the proposed Fund without the latter’s dangers.

Private bankers and technical experts were opposed to the provisions of the proposed International Fund because they were convinced that “the divergence of conditions in the various countries is so great that the stabilization of each currency must be treated as an individual problem” and not by a “formula that can be applied to all cases.”