How was the Bretton Woods monetary system established?
During the 19th and the first half of the 20th century, Great Britain occupied the leading positions throughout the world. British pound sterling virtually all the time played the role of world currency. The power of the country was undermined first by the First World War, and then by the Second. Huge military costs and losses greatly weakened the economy of the state. However, the United States, while overseas, not only did not lose their power, but also received additional development. In 1944, it was already clear that their economy was leading the world. In the US state of New Hampshire (on the border with Canada), in the resort town of Bretton Wood, representatives of forty-five countries met to discuss the possibility of creating a new economic order that could take effect after the war. It was a very important task, since the world war literally broke international trade relations.The Bretton Woods Conference was supposed to help all countries decide on what they see as a post-war economy, and agree on fundamental decisions that would become the basis for further economic development. At that time, about two thirds of the world's gold reserves were in the United States, and the economy was booming. At the same time, the main competitors were destroyed by the war and, accordingly, their positions were significantly weaker. The conference discussed various options for the future economic system, but finally the one that defines the world economy today was adopted.
Let's try to make a brief overview of what is the Bretton Woods monetary system. First of all, it was announced that the American currency corresponds to a strictly defined amount of gold. The price for an ounce (approximately 37 grams) of gold is $ 35. Any amount of US currency will henceforth be exchanged for gold without the slightest problem. The result was a dramatic change in the position of the dollar throughout the world. He became the main world currency.Recall that it was only July 1944. The war is not over yet, the atomic bomb has not been created yet. But in fact, a new world economic order was created, headed by the United States. Now many countries were interested in accumulating dollars. Over time, the dollar has become a standard currency for international payments. On the other hand, the global demand for the currency itself has grown. The number of dollars issued in the United States has increased very sharply (and the amount of gold has greatly decreased over the years).
The Bretton Woods monetary system was not only based on the increasing value of the dollar. Three organizations were created that became its foundation. These are the International Monetary Fund, the International Bank for Reconstruction and Development and a special body to control restrictions in the field of international trade (customs, tariff and import restrictions). The third of these organizations has become the predecessor of the World Trade Organization (WTO), which is widely known in our time. In 1968, the free market for gold was officially recognized. The exchange of dollars for gold was now possible only at the state level. This was now the Bretton Woods monetary system.In 1971, it was announced that there was no conversion of dollars into gold.
In 1973, the Jamaica International Conference decided that, from now on, exchange rates are not regulated by normative acts, but are determined on the basis of the market. The Bretton Woods monetary system has undergone changes, but it continued to operate on other important issues. The currency system is not only the currency itself, it is to a much greater degree the whole system of international currency relations. And she continues to live and develop further.