The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, United States (July 1–22, 1944) to regulate the international monetary and financial order after the conclusion of World War II.
The conference was attended by experts noncommittally representing 44 states or governments, including the Soviet Union.
It drew up a project for the International Bank for Reconstruction and Development (IBRD) to make long-term capital available to states urgently needing such foreign aid, and a project for the International Monetary Fund (IMF) to finance short-term imbalances in international payments in order to stabilize exchange rates.
Although the conference recognized that exchange control and discriminatory tariffs would probably be necessary for some time after the war, it prescribed that such measures should be ended as soon as possible.
After governmental ratifications the IBRD was constituted late in 1945 and the IMF in 1946, to become operative, respectively, in the two following years.
This led to what was called the Bretton Woods system for international commercial and financial relations.
The Bretton Woods System
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement.
The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states.
The Bretton Woods system required countries to guarantee convertibility of their currencies into U.S. dollar, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold (or 0.88867 gram fine gold per dollar).
It also envisioned greater cooperation among countries in order to prevent future competitive devaluations, and thus established the International Monetary Fund (IMF) to monitor exchange rates and lend reserve currencies to nations with balance of payments deficits.
The delegates deliberated from 1 to 22 July 1944, and signed the Bretton Woods agreement on its final day. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, these accords established the IMF and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group.
The United States, which controlled two-thirds of the world’s gold, insisted that the Bretton Woods system rest on both gold and the US dollar.
Soviet representatives attended the conference but later declined to ratify the final agreements, charging that the institutions they had created were “branches of Wall Street”.
These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. According to Barry Eichengreen, the Bretton Woods system operated successfully due to three factors: “low international capital mobility, tight financial regulation, and the dominant economic and financial position of the United States and the dollar.”
On 15 August 1971, the United States terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a Fiat currency.
Shortly thereafter, many fixed currencies (such as the pound sterling) also became free-floating, and the subsequent era has been characterized by floating exchange rates.
The end of Bretton Woods was formally ratified by the Jamaica Accords in 1976.
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