Bretton Woods1

BRETTON
WOODS
INSTITUTIONS
DR. HARMAN SHERGILL
WHAT WAS THE BRETTON WOODS
AGREEMENT AND SYSTEM?
When? • negotiated in July 1944
By Whom? • by delegates from 44 countries
• at the United Nations Monetary and Financial

Where? Conference held in Bretton Woods, New
Hampshire.
What? • Thus, the name “Bretton Woods Agreement.

INTRO
Under the Bretton Woods System, gold was the

basis for the U.S. dollar and other currencies were
pegged to the U.S. dollar’s value.
The Bretton Woods System effectively came to an
end in the early 1970s when President Richard M.
Nixon announced that the U.S. would no longer
exchange gold for U.S. currency.
THE BRETTON WOODS AGREEMENT
AND SYSTEM EXPLAINED
Approximately 730 delegates representing 44 countries met in Bretton

Woods in July 1944 with the principal goals of creating an efficient
foreign exchange system, preventing competitive devaluations of
currencies, and promoting international economic growth.
The Bretton Woods Agreement and System were central to these goals.
The Bretton Woods Agreement also created two important organizations
—the International Monetary Fund (IMF) and the World Bank. While the
Bretton Woods System was dissolved in the 1970s, both the IMF and
World Bank have remained strong pillars for the exchange of
international currencies.
DESIGNERS
• Though the Bretton Woods conference itself took place over just three weeks, the
preparations for it had been going on for several years.
• The primary designers of the Bretton Woods System were the famous British economist
John Maynard Keynes and American Chief International Economist of the U.S. Treasury
Department Harry Dexter White. Keynes’ hope was to establish a powerful global central
bank to be called the Clearing Union and issue a new international reserve currency called
the bancor.
• White’s plan envisioned a more modest lending fund and a greater role for the U.S. dollar,
rather than the creation of a new currency. In the end, the adopted plan took ideas from
both, leaning more toward White’s plan.
It wasn't until 1958 that the Bretton Woods System became fully
functional.
Once implemented, its provisions called for the U.S. dollar to be

pegged to the value of gold.
Moreover, all other currencies in the system were then pegged to the
U.S. dollar’s value.
The exchange rate applied at the time set the price of gold at $35 an
ounce.
KEY TAKEAWAYS
• The Bretton Woods Agreement and System created a collective international currency
exchange regime that lasted from the mid-1940s to the early 1970s.
• The Bretton Woods System required a currency peg to the U.S. dollar which was in turn
pegged to the price of gold.
• The Bretton Woods System collapsed in the 1970s but created a lasting influence on
international currency exchange and trade through its development of the IMF and World
Bank
BENEFITS OF BRETTON WOODS
CURRENCY PEGGING
The Bretton Woods System included 44 countries.
These countries were brought together to help regulate and

promote international trade across borders.
As with the benefits of all currency pegging regimes, currency pegs
are expected to provide currency stabilization for trade of goods
and services as well as financing.
• All of the countries in the Bretton Woods System agreed to a fixed peg against the U.S. dollar
with diversions of only 1% allowed.
• Countries were required to monitor and maintain their currency pegs which they achieved
primarily by using their currency to buy or sell U.S. dollars as needed.
• The Bretton Woods System, therefore, minimized international currency exchange rate
volatility which helped international trade relations.
• More stability in foreign currency exchange was also a factor for the successful support of
loans and grants internationally from the World Bank.
THE IMF AND WORLD
BANK
The Bretton Woods Agreement created two
Bretton Woods Institutions, the IMF and
the World Bank.
Formally introduced in December 1945 both
institutions have withstood the test of time,
globally serving as important pillars for
international capital financing and trade
activities.
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.
1 In the twenty-first century, the IMF has 190
member countries and still continues to
support global monetary cooperation.
2 the World Bank helps to promote these

efforts through its loans and grants to
governments.
THE BRETTON WOODS SYSTEM’S
COLLAPSE
• In 1971, concerned that the U.S. gold supply was no longer adequate to cover the number of
dollars in circulation, President Richard M. Nixon devalued the U.S. dollar relative to gold.
After a run on gold reserve, he declared a temporary suspension of the dollar’s convertibility
into gold.
• By 1973 the Bretton Woods System had collapsed. Countries were then free to choose any
exchange arrangement for their currency, except pegging its value to the price of gold.
• They could, for example, link its value to another country's currency, or a basket of
currencies, or simply let it float freely and allow market forces to determine its value relative
to other countries' currencies.
CONCLUSION
The Bretton Woods Agreement remains a significant event in world

financial history.
The two Bretton Woods Institutions it created in the International

Monetary Fund and the World Bank played an important part in helping to
rebuild Europe in the aftermath of World War II
Subsequently, both institutions have continued to maintain their

founding goals while also transitioning to serve global government
interests in the modern-day.
THE END

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BRETTON

When? • negotiated in July 1944

By Whom? • by delegates from 44 countries

• at the United Nations Monetary and Financial

What? • Thus, the name “Bretton Woods Agreement.

Under the Bretton Woods System, gold was the

Approximately 730 delegates representing 44 countries met in Bretton

Once implemented, its provisions called for the U.S. dollar to be

The Bretton Woods System included 44 countries.

These countries were brought together to help regulate and

The World Bank, initially called the International Bank for

2 the World Bank helps to promote these

The Bretton Woods Agreement remains a significant event in world

The two Bretton Woods Institutions it created in the International

Subsequently, both institutions have continued to maintain their

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