ABSTRACT
American hegemony 438 27.3 The emergence of the G7 (1975) and its consequences for the
UN system 439
Figure 27.1 G7/G8 conferences from 1975 442
Monetary crises during the early 1960s
In the early 1960s the Bretton Woods system began to weaken due to problems with the American dollar and the British pound sterling. It started when in 1960 the total amount of dollars exceeded the US holdings of gold. When speculators demanded gold for their notes the US was not able to solve the problem by itself. An international solution had to be found. The same was true of the sterling crisis of 1961. The IMF facilities were simply insufficient to handle these crises. A number of international institutions developed ad hoc management and looked for solutions. The Bank for International Settlements founded in 1930 (BIS, see Figure 18.4) had provided European central bank governors with the opportunity to meet regularly in Basel, Switzerland, and if required to work out solutions. The US was not a BIS member and had not participated in these meetings, as it regarded the IMF and IBRD as the main international financial institutions. At Bretton Woods it had even proposed to the Europeans that the BIS should be wound up, but the European central bankers had ignored this suggestion. The dollar crisis of 1960 caused the chairman and higher-ranked staff members of the US Federal Reserve Board to join the monthly BIS meetings. To help the US the BIS created a ‘gold pool’, in which bankers agreed to centralize their gold dealings and thus regulate the price of gold (Spero 1985, 45). Although the BIS and its monthly meetings proved helpful to the US, the American government did not consider finding a solution through this institution. President Kennedy proposed that the OECD should establish a working party to discuss the coordination of the balance of payment positions of its member states. This became known as Working Party Three, or in jargon WP3, and consisted of the ministers of finance and their deputies. It was agreed that the IMF and the BIS would attend WP3 meetings.
