Bretton Woods system
Quick Summary
The Bretton Woods system was established in July 1944 during World War II by delegates from over 40 countries. Its primary goal was to create a stable postwar international monetary system, addressing issues like volatile exchange rates and inflexible fixed rates that plagued the interwar period.
The system led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (now the World Bank Group). Countries agreed to maintain fixed, yet adjustable, exchange rates, with the U.S. dollar serving as the reserve currency. The U.S. pledged to back the dollar with gold at a fixed price of $35 per ounce. This arrangement effectively put the world on a dollar standard, facilitating international trade and economic growth. However, by the late 1960s, increased U.S. dollar supply led to a depletion of gold reserves, and the system ultimately collapsed in 1971 when the U.S. ended the dollar's convertibility to gold.12
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