The Bretton Woods Agreement: Understanding Order in Council
The Bretton Woods Agreement, also known as the Bretton Woods System, is a crucial event in the history of the global economy. It was signed in 1944, in Bretton Woods, New Hampshire, by the representatives of 44 countries. The agreement aimed to establish a stable monetary system and promote international trade after the devastation of World War II. The Bretton Woods Agreement introduced the U.S. dollar as a world reserve currency, which was backed by gold reserves held by the United States. However, the agreement was not just an international treaty. It was also enacted into law through an Order in Council in Canada.
An Order in Council is an executive decision made by the Governor-General or the Lieutenant Governor of Canada, on the advice of the Queen`s Privy Council for Canada. It is a legal instrument used to make a wide range of decisions, from the appointment of officials to the creation of new laws. In the case of the Bretton Woods Agreement, an Order in Council was required to implement the provisions of the agreement in Canada.
The Bretton Woods Agreement created a new system of fixed exchange rates, which meant that the value of a currency was fixed to the value of gold. The United States agreed to convert dollars into gold at a fixed rate of $35 per ounce. This created a stable international monetary system, which allowed for the expansion of international trade and investment. The fixed exchange rate system also helped to reduce the volatility of currency markets, which had been a major source of instability in the 1930s.
The Order in Council for the Bretton Woods Agreement was issued on July 22, 1946, and it provided the legal framework for the implementation of the agreement in Canada. The order authorized the Minister of Finance to take the necessary steps to ensure compliance with the provisions of the agreement. This included the establishment of a fixed exchange rate system, the creation of a foreign exchange control system, and the management of Canada`s gold reserves to ensure their availability for international transactions.
The Bretton Woods Agreement remained in effect until 1971 when it was abandoned by the United States. The collapse of the system was due to the unsustainable economic policies of the United States, including the financing of the Vietnam War. This led to a massive increase in U.S. debt and inflation, which undermined the stability of the U.S. dollar. As a result, the fixed exchange rate system became untenable, and countries were forced to abandon it.
In conclusion, the Bretton Woods Agreement was a critical event in the history of the global economy. It created a stable international monetary system, which allowed for the expansion of international trade and investment. The agreement was implemented in Canada through an Order in Council, which provided the legal framework for compliance with its provisions. Although the Bretton Woods System is no longer in effect, its legacy continues to shape the international economic system. Understanding the Order in Council for the Bretton Woods Agreement is essential to understanding its impact on the Canadian economy and the global economy as a whole.
