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Britain and the Age of Imperialism Britain and the Age of Imperialism

Britain and the Age of Imperialism - PowerPoint Presentation

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Britain and the Age of Imperialism - PPT Presentation

Britain and the Age of Imperialism Established a liberal international economic order LIEO through its hegemonic power Charles Kindleberger Britain and the Age of Imperialism Established a ID: 263573

gold dollar britain system dollar gold system britain bretton monetary liquidity woods currencies pegged world growth great standard capital

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Slide1

Britain and the Age of ImperialismSlide2

Britain and the Age of Imperialism

Established a

liberal international economic order

(LIEO) through its “hegemonic” power (Charles

Kindleberger

).Slide3

Britain and the Age of Imperialism

Established a

liberal international economic order

(LIEO) through its “hegemonic” power (Charles

Kindleberger

).Britain maintained open markets and compelled other states to open their markets. The British Navy maintained commerce free from piracy. Slide4

Britain and the Age of Imperialism

Established a

liberal international economic order

(LIEO) through its “hegemonic” power (Charles

Kindleberger

).Britain maintained open markets and compelled other states to open their markets. The British Navy maintained commerce free from piracy.

Britain upheld the most stable exchange system in world history, the Classic Gold Standard. Slide5

Britain and the Classic Gold Standard

The Four Monetary Functions of British Hegemony

:Slide6

Britain and the Classic Gold Standard

The Four Monetary Functions of British Hegemony

:

1) Great

Britain led in the adoption of the gold

standard. Slide7

Britain and the Classic Gold Standard

The Four Monetary Functions of British Hegemony

:

1) Great

Britain led in the adoption of the gold

standard. 2) Great Britain acted as a market for "distress goods.”Slide8

Britain and the Classic Gold Standard

The Four Monetary Functions of British Hegemony

:

1) Great

Britain led in the adoption of the gold

standard. 2) Great Britain acted as a market for "distress goods.” 3) Great Britain acted as the "lender of last resort.”  Slide9

Britain and the Classic Gold Standard

The Four Monetary Functions of British Hegemony

:

1) Great

Britain led in the adoption of the gold

standard. 2) Great Britain acted as a market for "distress goods.” 3) Great Britain acted as the "lender of last resort.”  4) Great Britain and the Bank of England through its discount policy, provided a supply of liquidity, of pound sterling into the

system, as "

counter-cyclical

finance.”

 Slide10

The Impact of Britain’s Decline

With the decline of Britain, the world had no hegemon to write the rules of international exchange. Slide11

The Impact of Britain’s Decline

With the decline of Britain, the world had no hegemon to write the rules of international exchange.

 

The Genoa Conference (1922

)Slide12

The Impact of Britain’s Decline

With the decline of Britain, the world had no hegemon to write the rules of international exchange.

 

The Genoa Conference (1922

)

Established the gold-exchangestandard system.Slide13

The Impact of Britain’s Decline

The

1931 world financial crisis

and Gresham’s Law (

bad money drives out good

)The tendency for money of lower intrinsic value to circulate more freely than money of higher intrinsic and equal nominal value.Result was a world of highly flexible exchange rates and competitive devaluations. Slide14

The Bretton Woods Monetary SystemSlide15

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold. Slide16

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”Slide17

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”

Signatories agreed not to use capital controls or otherwise “sterilize” capital inflows.Slide18

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”

Signatories agreed not to use capital controls or otherwise “sterilize” capital inflows.

T

he

U.S. had sole responsibility for fulfilling the liquidity function. Slide19

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”

Signatories agreed not to use capital controls or otherwise “sterilize” capital inflows.

T

he

U.S. had sole responsibility for fulfilling the liquidity function.

N-1 problem:

 

the

dollar could not be devalued without devaluing all other currencies. Slide20

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”

Signatories agreed not to use capital controls or otherwise “sterilize” capital inflows.

T

he

U.S. had sole responsibility for fulfilling the liquidity function.

N-1 problem:

 

the

dollar could not be devalued without devaluing all other currencies.

T

his

system was

based on norms of compromise between the role of markets and states (what John

Ruggie

calls “embedded liberalism”).Slide21

The Bretton Woods Monetary System

The U.S. supplied the world's reserve currency: the

dollar, which was

pegged to gold and all other currencies were pegged to the dollar at $35 for an ounce of gold.

Other

countries pledged to keep their currencies within 'bands' in which the fulcrum was parity to the US dollar. Only the dollar was convertible into gold. The dollar was "as good as gold.”

Signatories agreed not to use capital controls or otherwise “sterilize” capital inflows.

T

he

U.S. had sole responsibility for fulfilling the liquidity function.

N-1 problem:

 

the

dollar could not be devalued without devaluing all other currencies.

T

his

system was

based on norms of compromise between the role of markets and states (what John

Ruggie

calls “embedded liberalism”).

Bretton Woods led to the creation an

array of international institutions: GATT (WTO);

the World

Bank; International Monetary

Fund.Slide22

The Causes of the Breakdown of Bretton WoodsSlide23

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

”Slide24

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

The Vietnam WarSlide25

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

The Vietnam War

LBJ’s Great SocietySlide26

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

Robert Triffin, a Yale economist, published a book entitled Gold and the Dollar Crisis (1960) – established “Triffin’s Dilemma”: the contradiction between the need for liquidity and the problem of “dollar overhang” (and its speculative implications). Slide27

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

Robert Triffin, a Yale economist, published a book entitled Gold and the Dollar Crisis (1960) – established “Triffin’s Dilemma”: the contradiction between the need for liquidity and the problem of “dollar overhang” (and its speculative implications). The

U.S. policy of “

b

enign neglect” of its balance of payments (liability financing).

Valéry Giscard d’Estaing’s “exorbitant privilege”

The ability to import much more than a country exports and to finance it by creating money out of thin air.Slide28

The Causes of the Breakdown of Bretton Woods

The

period of dollar shortage (1944-1958

), during which sufficient liquidity was the main limitation on growth, came to an end. Yet the U.S. continued to spend, producing a growth “dollar glut.

Robert Triffin, a Yale economist, published a book entitled Gold and the Dollar Crisis (1960) – established “Triffin’s Dilemma”: the contradiction between the need for liquidity and the problem of “dollar overhang” (and its speculative implications). The U.S. policy of “

b

enign neglect” of its balance of payments (liability financing).

Surplus countries in Europe and Japan challenged the system by using convertibility of dollars into gold, forcing Nixon to “close the gold window” and take the U.S. off the gold standard in 1971 (officially via the Smithsonian Agreement, which devalued the dollar). Slide29

Key Lessons of the Death of Bretton WoodsSlide30

Key Lessons of the Death of Bretton Woods

Providing liquidity is not enough to sustain a well-balanced monetary system.

Slide31

Key Lessons of the Death of Bretton Woods

Providing liquidity is not enough to sustain a well-balanced monetary system.

Fixed pegs can provide stability for a while but the system needs greater flexibility as well. Slide32

Key Lessons of the Death of Bretton Woods

Providing liquidity is not enough to sustain a well-balanced monetary system.

Fixed pegs can provide stability for a while but the system needs greater flexibility as well.

No matter how much flexibility economies want, there must be a reserve currency in the system (

de facto

or

de jure

). Slide33

Key Lessons of the Death of Bretton Woods

Providing liquidity is not enough to sustain a well-balanced monetary system.

Fixed pegs can provide stability for a while but the system needs greater flexibility as well.

No matter how much flexibility economies want, there must be a reserve currency in the system (

de facto

or

de jure

).

Power and regimes matter in the international political economy. Slide34

The ‘Jamaica’ Monetary System

IMF signatories agreed in 1976 to abandon gold parity.

The treaty created a legal basis for an international system of floating exchange rates. National states would set their own par values for their own currencies.

Countries were free to create their own

regional

monetary unions (e.g., the European Monetary System).

The U.S.

de facto

retained its “exorbitant privilege.”