The Global Economic Order
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The Global Economic Order

The International Law and Politics of the Financial and Monetary System

Elli Louka

Exploring in depth the institutions that underpin the global economy, this study provides invaluable insights into why a minimum economic order has endured for so long and why states are unwilling to establish a maximum order, a global safety net for all. The author investigates how debt – a critical component of states’ economic infrastructure – leads to debilitating crises, and how these crises undermine the economic autonomy and political independence of states. 
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Chapter 8: The Bretton Woods system

Elli Louka

Abstract

The Bretton Woods system created after World War II was the first monetary system that was endorsed globally through an international treaty. Through the Bretton Woods all countries pegged their currencies to the dollar which was the only currency pegged to the gold. The Bretton Woods established the International Monetary Fund (IMF), an institution that extends credit to states suffering from temporary balance of payments problems. Deficit states argued along the line that the IMF should be much more than a temporary panacea for the economic problems of states. The United States, the prime sovereign after World War II, refused to render the IMF, and thus implicitly itself, the lender of last resort for all states. The Bretton Woods worked well until states realized that the US balance of payment deficits were unsustainable given the gold reserves of that state.

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