From Bretton Woods to World Inflation

February 17, 1945

It is to be hoped that the bill on the Bretton Woods agreements now introduced in Congress will be considered in an open-minded and nonpartisan spirit. Special provisions added by the bill will need to be examined in addition to those of the Bretton Woods agreements themselves. The main question to be asked now is whether, under the bill as drawn, Congress will be free to consider particular provisions of the Bretton Woods agreements on their individual merits.

Technical experts, including those of the American Bankers Association and other bodies representing the bankers of the country, have urged that the proposed International Bank be adopted as a helpful instrument in world economic cooperation. But they have put forward strong reasons for at least postponing until a later time action on the proposed International Fund. As the New York State Bankers Association committee remarked this week in connection with the Fund:

We are 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. We do not think it is possible to develop a workable formula that can be applied to all cases. Too much depends upon the will and the efforts of the individual country for the over-all approach to achieve the success anticipated by the authors of the Monetary Plan.

The judgment of these bankers ought certainly not be rejected out of hand. As a group, bankers want to see as high a volume as possible of international trade. They want stable exchanges so that they and their business customers can grant international credits and conduct other international transactions with reasonable security. The cause of international cooperation would itself only be hurt in the long run if unwise measures which would work out badly are adopted along with necessary measures which have a high prospect of success.

There were still major obscurities surrounding the Monetary Fund agreement. Many Americans still believe that the agreement took us back along the road to a gold standard and currency stability, but Lord Keynes, leader of the British delegation at Bretton Woods, had declared before the House of Lords that “this Bretton Woods plan is the exact opposite of...a gold standard”, and that it would permit both “flexible” and discriminatory exchange-rates. The Roosevelt Administration should have withdrawn the Fund proposal until these ambiguities had been cleared up.