Jack Murphy

Mr. Shirk

International Relations

11 November 2013

Blog #4

            As shown by the failures of the Bretton Woods System, to pin your currency to another currency is not a good idea. While it does make sense why Harry Dexter White, of the U.S. treasury and developer of the Bretton Woods System, and the U.S. would want to make there currency the standard for other nations since it would make the U.S. currency the most sought after, there were flaws. Parts of the Bretton Woods System I do agree with though such as the ‘par value’ system or ‘adjustable peg’ system, since it obligated its members to “declare a par value (a ‘peg’) for their national money and to intervene in currency markets to limit exchange-rate fluctuations” and since it allowed members to “alter their par value to correct a ‘fundamental disequilibrium’ in their balance of payments” (Cohen 85). I also agree that “some binding framework of rules was needed to ensure the states would remove existing exchange controls limiting currency convertibility and return to a system of free multilateral payments” (Cohen 85). This would keep the market fair and prevent inflation. Lastly I agree that the formation of the IMF as an “institutional forum for international cooperation’s on monetary matters” (Cohen 85) was needed. The IMF largely being led by the U.S. was also beneficial to the U.S. since they could control the worlds “regulatory (administering the rules governing currency values and convertibility), financial (supplying supplementary liquidity), and consultative (providing a forum for cooperation among governments)” (Cohen 86). Yet I do not believe that it was a good idea to back currencies with U.S. dollars.

            While essentially the Bretton Wood System was still on the gold standard since “the U.S. pledged convertibility of its dollars into gold at a fixed price” (Cohen 86) there were many flaws. First of all, while the demand for money increased it price in gold did not change. The high demand caused inflation rates to rise since more money was needed. That along with the recession in the 1970’s caused stagflation. To fix this President Nixon deflated the dollar causing countries to cash in their dollars for gold and essentially ending the Bretton Woods System. Also, hypothetically, if there was a crash in the U.S.  economy, such as that during the Great Depression, when the Bretton Woods System was in use, every currency using the system would suffer since their money would be worth whatever the pegged value was.

            So in my opinion the Bretton Woods System could have worked if the gold standard was kept, the same rules were made creating a fixed exchange rate, an IMF like organization, and restricting economic warfare. With a gold standard the U.S. would not have had to print excess dollars, which caused inflation and the eventual downfall of the Bretton Woods System. This is why gold would have been better then the U.S. dollar.

Work Cited

Amadeo, Kimberly. "Bretton Woods International Monetary System and 1944 Agreement." About.com US Economy. About.com, 4 Jan. 2012. Web. 11 Nov.2013.

Cohen, Benjamin J. "Benjamin J. Cohen, Bretton Woods System." Benjamin J. Cohen.                                                                         Polisci.ucsb.edu, n.d. Web. 11 Nov. 2013.

Blog Post #4

Artem Muchnik

11/11/13

                                                Blog post #4

            The Bretton Woods system emerged as the culmination of some two and a half years of planning for post-war monetary reconstruction, the system had some good approaches and at the same time there were multiple flaws in the system. In my opinion some approaches that I find were good in this system were that the system emerged with the “pegged rate” or “adjustable peg” currency regime, which was also known as the “par value system”, and the establishment of the International Monetary Fund (IMF). While some flaws in the system in my opinion are that the system utilized one currency, the currency it was pegged to, which could be detrimental to the system as if that currency failed, or inflated dramatically, other states dependant on it would suffer too due to it.

            I believe that the establishment of the pegged rate was a good approach because it gave other states the ability to maintain their currency in check as they also controlled some currency in the form of dollars; which did in fact make the US currency more desirable. The reason I find this was a good approach to the global economy is because it gave other states the ability to limit exchange rate fluctuations within maximum margins of 1%. The IMF was also a good approach in my opinion due to the fact that it let other states borrow needed foreign currency in amounts determined by the size of its quota in order to help maintain their own economy. Overall the IMF was largely established the way it was due to the fact that there was a need for an institutional forum for international cooperation on monetary matters.

            The flaws that were evident in this system were that since it was pegged to one specific currency, the US Dollar, there was a great chance that if the dollar were to fail the states dependant on it would too; and that ended up happening as the dollar inflated drastically. This lead not only to the economy of states dependant on the dollar to suffer but the system itself started to fall apart. This inflation that happened lead to the fact that the convertibility of the dollar into gold was suspended in 1971, as too many states were turning in their dollars for gold in hopes of redeeming their economy. This put the Bretton Woods system under much strain and eventually the Bretton Woods system passed into history.

            Overall I don’t think that it was a very smart idea to back global currencies with the US dollar as that just opens the door for multiple problems when multiple states depend upon the same currency, it doesn’t sound like the most logical approach unless it is sure that the pegged currency would never suffer any problems in value, which is bound to happen in my opinion. Since the Bretton Woods system pretty much completely depended upon the gold standard, I think that if it were kept, the system would have survived, but it is important for the system to be regulated properly with more rules and regulations. If the gold standard were still around it probably would have had a great impact on regulating the inflation rates, as every dollar would actually be backed by gold which actually holds its value and is more stable then currency in general.

Rory McClurg

Response Paper #4

Post-Colonialism and Failed States

     The post-9/11 world has changed international concerns and priorities drastically. During most of the 20^th century, the Europeans and Americans, the ones with international power at the time, were preoccupied with colonial assets and the Cold War. As terrorism became a more important issue, it became apparent that failed states were a huge problem that had been largely ignored in the past. This paper will be centered around how colonialism in Africa has doomed the continent to have a rash of failed states.

     The colonial era was one highlighted by exploitation and upheaval of the native norms. The Europeans essentially started grabbing up whatever territory they could get, but when drawing the lines on the map, they did not take into account any of the preexisting cultural differences between natives. The Europeans, very used to the idea of a nation state with concrete borders on a map imposed this system on natives in areas such as West Africa, that were not acclimated to such concepts. This “drawing of the lines” so to speak, lumped tribes that didn’t always get along or even those that had deep seeded for one another in the same country. This is readily apparent in Nigeria, where the borders were drawn not considering the fact there were many competing ethnic groups in the country such as the Igbos and the Biafrans. This led to much instability in the country, which even culminated in a civil war in 1967 resulting in over a million deaths. This is a common theme throughout postcolonial Africa, civil wars have erupted in Sierra Leone, Sudan, and Rwanda to name a few.

     The way Europeans treated their colonies speaks volumes about why many ex-colonies are failed states. Sometimes the Europeans even intentionally broke apart whole nations into competing spheres within a single state to more easily maintain control of the natives. During the Belgian occupation of what is now Rwanda and the Democratic Republic of Congo, they essentially exploited the country for its resources and left. They placed the wealthy Tutsi minority tribe in power, who treated the poor Hutu majority as nothing. In addition, the Belgians only concern was acquiring profit from this colony, and forced the peasants to work with no pay. After they were done with the colony, they essentially just left with no assistance to the natives. The toxic way this colony was run and subsequently abandoned by the Belgians paved the way for one of the worst genocides in history, and civil war. Considering how African colonies were exploited, it is no surprise fourteen of the top twenty failed states according to the failed states index, were previously European colonies in Africa.

Reference: Failed State Index, Foreign Policy Magazine

                        http://www.foreignpolicy.com/failedstates2013

Blog Post 4

Dana Kravitz

Blog Post #4

Though realists may argue that we live in a state of anarchy I think the Bretton Woods System article by Benjamin Cohen and the class lecture prove that it is necessary to have international organizations and international cooperation in order to have a successful world market. This can be seen through the use of the UN, the World Bank, and the WTO.

The United Nations was formed in 1945 in close of World War II in to stop another World War from happening again. Its goal was to promote peace through mutually assured protection against an aggressor state. The UN has caused states to consul other nations before making large state decisions. This can be seen in the recent debate on what to do in Syria. Though United State would like to intervene in Syria they do not have the UN’s support because of Russia and Chinas power. This is an example of how sometimes the idea of anarchy and every state for themselves does not necessarily stand up because of respect for other states wants and the need for their support.

The World Bank is a great example how many countries have a common interest. Their goal is reduce the world’s poverty, which is something that most states want. The World Bank also encourages gender equality, climate control, education, protection AIDs, etc. They approve projects and then supply loans for them. This shows how even though each state has individual goals; most states want to work towards a better less impoverished world.

The World Trade Organization makes rulings as to whether something is fair trade. For example in 2012 the United States tired to reduce youth smoking by banning the sale of most flavored cigarettes. This ban resulted in Indonesian tobacco companies that make clove cigarettes bringing a suit to the World Trade Organization. America lost in the ruling and followed its decisions. Since there is no real international law technically the US does not have to follow what is decided, they do because they want other countries to so the same for them. They must follow what was told them so when they have a problem other countries do the same. This again shows how mutual dependence on other countries and international organizations help to prevent conflict and solve problems.

Though some may argue that these organizations are unnecessary or they inhibit things from getting done, I believe that they are all needed in having a smooth running world market.  Sometimes realists think the worst about states but I think these organizations show that sometimes we can hope for the best.

Response Paper #4

Jessie Latter

GVPT200

11 November 2013

Response Paper #4: Silver Ch. 1

            The first chapter of The Signal and the Noise by Nate Silver, titled “A Catastrophic Failure of Prediction”, focuses on the housing bubble in the 2000’s and subsequent financial crisis of 2008. Silver says that many predictions are wrong because people cannot always objectively decide what is good information, which is what led to preventable catastrophes like the financial crisis. I agree with Silver’s argument that there are three acts that tell the story of the financial crisis as a failure of prediction.

            In act I, Silver argues the inevitability of a decline in the housing market after a boom in real estate prices, thus, creating a housing bubble. Silver says that previous housing booms during the postwar years had seen a dramatic increase in homeownership, unlike the 2000’s who saw only modest increases in homeownership (Silver 31). This “artificially enhanced” housing boom made it easier to obtain mortgages, even though “the 2000’s were associated with record-low rates of savings…” (Silver 31). His next point is that homeowners, not entirely by their own fault, had underestimated the returns on their investment in a house and that they could not put it off until later (Silver 32-3). I agree that the “artificially enhanced” housing boom and unrealistic assumptions by homeowners contributed to the housing bubble because they created a situation that made it easier to obtain mortgages and make consumers overconfident about their ability to pay back loans.

            In act II, Silver argues that leverage contributed to the financial crisis. After the housing bubble collapsed, consumers were wiped out and began to spend less (Silver 34). This decline in the GDP may have caused a recession but it was major banks that had bet on housing in the form of mortgage-back securities, like the Lehman Brothers, that led to a financial crisis when the housing bubble collapsed (Silver 34-5). Silver also argues that banks like the Lehman brothers may have been a lot more cautious about betting on mortgage-backed securities if credit ratings agencies had not vouched for them by handing out AAA ratings (Silver 36). I agree that leverage contributed to the financial crisis because major banks were borrowing money to bet on mortgage-backed securities that they were guaranteed would not default, even though they did when the housing bubble collapsed. If they had not placed these leveraged bets then the United States may have only faced a recession, not a financial crisis.

            In act III, Silver argues that there is always uncertainty when making predictions. Unlike risk, uncertainty “is risk that is hard to measure” (Silver 29). The White House introduced a stimulus package to Congress in 2009 that was eventually agreed upon at $800 billion (Silver 40). Unfortunately, unemployment continued to rise and in October 2009 it hit 10.1% (Silver 40). No economists had predicted the magnitude of the crisis and the White House did not prepare the public for the possibility of failure (Silver 41). Silver argues that betting on the uncertainty of something like the effect of a stimulus package atop the uncertainty of economic forecasts can lead to bad predictions (Silver 42). I agree that there is always uncertainty when making predictions, which is why the White House and economists should not have underestimated the scope of the financial crisis and prepared for the worst possible outcome.

           

Works Cited

Silver, Nate. The Signal and the Noise: Why so Many Predictions Fail--but Some Don't. New York: Penguin, 2012. Print.

Response Paper

Whitney Lazo

November 7, 13

Problems With the United Nations

            The veto power of the Security Council of the United Nations is too strong and should not be permanent. The great powers that won World War II are definitely worthy and respectable. However, this does not mean that they should hold this position forever. China, France, Russia, the United Kingdom, and the United States may be trustworthy due to their successful states, but they may also hold values that are not beneficial to the purpose of the United Nations. In addition, one or more of these states may in the future adopt corrupt ideals and they will still hold the permanent veto power. I propose a rotation for the five permanent members of the Security Council every ten years to be chosen by the top twenty most respectable states in the world. This way the five elected states will still be among the most successful and no state will have veto power if they do not deserve it.

            The veto power has a huge impact on the operation of the UN Security Council and for one of these nations to have the ability to shut down a proposal of establishment of peace or military force in order to maintain security could be detrimental to the world.  It is not safe to give five states this power because these states may be biased and not do the right thing for others in need around the world. I do believe there needs to be some sort of leadership in the Security Council, which is why I propose having five members with veto power for a decade at a time. It is important to change the Security Council to give other leading nations a chance to direct their voting power towards the good of the world and help nations that the previous five members turned down.
            This rotation will help change where the UN directs their help and assistance so that nations that are not getting the help they need may have an opportunity. It will get rid of permanent biases and still maintain organizations and checks on the Council. Supporters of the UN Security Council veto power may say that this program needs leadership and that these five nations are the best nations to promote the goals of the Security Council. However, there are other nations suitable for the job and it is important to give them a chance. The UN promotes equality and fairness and this certainly does not represent those values.