The collapse of the Bretton Woods system is still a subject of intense debate, there are a variety of theories as to why it collapsed. These theories range from the budget deficit problems, concerns of U.S ability to turn dollars into gold , to blaming the Vietnam War, and also marginal tax rates. What seems to me to be a point of agreement is that the United States ran an increasing balance of trade deficit, and in the end it could not establish credibility on reducing this deficit. The following quote by Henry Hazlitt I feel is a strong point to sum up the demise of the Bretton woods system.
"No single nation's currency could long be expected to hold up the value of all the currencies of the world. Even if the United States had itself pursued a far less inflationary policy in the twenty- seven years from 1944 to 1971, it could not be expected indefinitely to subsidize, through the IMF, the International Bank, and gold conversion, the inflations of other countries. The world dollar-exchange system was inherently brittle, and it broke." Henry Hazlitt From Bretton Woods to World Inflation: a Study of Causes and Consequences Chicago: Regnery Gateway. 1984
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