ABA Banking Journal - August 2008 - (Page 10) briefing Then & Now 100th Anniversary 1908-2008 What emerged from N.H.’s woods in ’44 T he D-Day landings in Normandy had just occurred, and the last stand of the Third Reich, the Battle of the Bulge, was still months away. Yet, Allied planning was well under way for the postwar world. And one of the key elements of that planning was money. Many of the roots of the war had begun in money issues, ranging from the crippling hyperinflation that aided Hitler’s rise to power in Germany to the advent of the worldwide Great Depression. The discussions that would, after much preliminary planning and maneuvering, ensue at the Bretton Woods, N.H., World Monetary Stabilization Conference, in July 1944, were esoteric. Yet they would have far-reaching repercussions throughout modern economic history. Key among creations of the 45-nation conference were the International Monetary Fund and what came to be the World Bank. Initially an effort of the major and minor Allies, the Bretton Woods agreements and the organizations that it birthed would be joined by Germany and Japan in 1952. Today, 185 countries belong to the Bank and the IMF. But in 1944, there were many ideas, and only the slightest beginnings of consensus. In March 1944 Banking featured a debate in print, “The Quest for Stability,” drawn from papers, between two plans’ proponents. Head of one key school of thought was a name familiar to every survivor of a basic economics course: John Maynard Keynes. The British economist, by then a Lord, backed a complex system that would be based on an International Clearing Union, which would deal in an international bank-money called bancor. The proposed currency, which didn’t fly, would have been a substitute for gold, its value fixed through a multi-faceted formula. Another plan presented by Banking in its debate was advocated by Leon Fraser, former head of the Bank of International Settlements and then president of First National Bank of New York. He favored a system blending the dollar and the pound sterling. An excerpt from a speech: “Today the dollar, reanchored to gold, is the strongest currency on earth. It can serve as the regulator of international money. But the sun never sets upon the economic influence and the far-flung use of sterling. … We should build on the experienced machinery that we have instead of creating elaborate new machinery.” Unfortunately, as Banking noted in “The Road to Bretton Woods,” in August 1944, “we find that even monetary economists who advocate a common world medium may, and all too often do, mean entirely different things when they speak of a ‘gold standard’.” The debate continued into Banking’s pages in 1945, with Herbert Bratter, Washington correspondent, who had attended portions of the discussion himself, presenting a roundup of opinion on the Bretton Woods proposals. By then they were finalized and before Congress for consideration. Said one domestic commentator: “If the gold standard seems too rigid—as some of its critics maintain—would not a plan of this kind give the world a nationalistic monetary fluidity of flood proportions?” In time, what became known as the Bretton Woods System was launched. The scheme was one of fixed exchange rates among members’ currencies. The system included a peg to gold, but in most practical terms was pegged to the dollar. Fast forward. In 1971, the U.S. informed IMF that it would no longer freely buy and sell gold to settle international transactions. In the 1970s a system of floating exchange rates was established among the major currencies, a system that survives to this day. — Steve Cocheo, executive editor ing introduction of federal deposit coverage, it also saw the repeal of Prohibition. So, lift one for FDIC, and for repeal of the National Prohibition Act, as well. C-Notes Like this branch design ☞ See what month’sfor leading edgefeature? passed branch design in 1945 in “Planning a Bank to Make Friends,” at www.ababj.com and click on the red 100th anniversary badge. by Myron Stearns, a popular writer of the day. All of the articles dealt with check fraudsters and their methods, told as short stories. Examples: “The Doctor’s Deposit”; “Quick Work at the Bank”; and “He Specialized in Treasury Checks.” For samples of these classic columns, go to www.ababj.com. celebrates its 75th ☞ FDIC this yeardeposit insurance is anniversary. While more popular than ever, FDIC shares the three-quarter-century candles with another milestone. While 1933 saw the sober- ☞ Do you have a problem with check fraud? A popular feature in Banking during the late years of World War Two was a series of “factual fiction” stories written “Liquidity” and “withdrawals” had different meanings to some during Prohibition 10 AUGUST 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.ababj.com http://www.ababj.com http://www.ababj.com
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