The Bretton Woods Agreement was created in 1944 at a conference of all allied nations of World War II. It took place in Bretton Woods, New Hampshire. Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. The Bretton Woods system is a set of uniform rules and guidelines that provide the framework for the establishment of fixed international exchange rates. Essentially, the agreement required the newly created IMF to set the fixed exchange rate for currencies around the world. Each country represented took responsibility for maintaining the exchange rate, with incredibly tight margins above and below. Countries that have difficulty staying within the fixed exchange rate window could ask the IMF for an interest rate adjustment, which would then be the responsibility of all allied countries. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations to oversee the new system. In 1971, the problem was so serious that US President Richard Nixon announced that the possibility of converting the dollar into gold would be “temporarily” suspended. This decision was inevitably the straw that broke the camel`s back for the system and the agreement it described. The Bretton Woods Agreement was reached in 1944 at a summit in New Hampshire, USA, at a venue of the same name.
The agreement was reached by 730 delegates who were representatives of the 44 allied nations who attended the summit. Delegates used the gold standard as part of the agreement, in the simplest terms, the gold standard is a system used to understand the value of money, and this means that a currency is compared to how much it is worth in gold and at what rate it can be exchanged for gold. to create a fixed exchange rate. The Bretton Woods countries decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a fixed pool of national currencies and gold that would be held by the IMF. Each country that is a member of the Bretton Woods system would then have the right to borrow what it needs as part of its contributions. The IMF was also responsible for the implementation of the Bretton Woods Agreement, which was signed between world powers in July 1944 in Bretton Woods, New Hampshire, United States. It had established the International Monetary Fund (IMF) to manage the foreign trade surpluses and deficits of its member countries, and the International Bank for Reconstruction and Development had been established to finance reconstruction. The Bretton Woods Agreements of 1944 established a new global monetary system. It replaced the gold standard with the US dollar as the world currency. In this way, he established America as the dominant power in the global economy.
After the agreement was signed, America was the only country capable of printing dollars. Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. If the value of a country`s currency became too low against the dollar, the bank would buy its currency on the foreign exchange markets. The agreement also facilitated the creation of extremely important structures in the financial world: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), now known as the World Bank. .