The other day I had a call with @kurtmo4ya, and we discussed the fact that it tends to come up relatively frequently that people have heard of the Bretton Woods agreement, but don’t really understand what it is.
The UN Monetary and Financial Conference was held at Bretton Woods, New Hampshire, in July 1944 with delegates from 44 countries. In order to avoid competition devaluing currencies of various nations, an efficient FOREX system was created.
So, the goal was to improve global economic growth through this process.
The system that was created as a result of this meeting relied on the determination that gold would be the basis for the U.S. Dollar and other currencies would be pegged to the Dollar’s value.
In addition, two important and lasting organizations were created as a result of the meeting. The International Monetary Fund (IMF) and the World Bank.
Although the agreement was started in 1944, it was not until 14 years later, in 1958 at that the system was fully functional.
The purpose of the IMF was to monitor exchange rates and identify nations that needed global monetary support.
The World Bank, initially called the International Bank for Reconstruction and Development, was established to manage funds available for providing assistance to countries that had been physically and financially devastated by World War II.
This all continued as planned until President Nixon announced that gold would no longer be exchanged for American currency under Bretton Woods. Despite the end of this element of the system, the IMF and World Bank continue to play an important role in global economic growth.
190 countries are members of the IMF in the twenty-first century, and it continues to play a role for global monetary cooperation as part of its lending and grant programs & the World Bank assists various governments in promoting these efforts.
