Bretton Woods Agreement

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Bretton Woods Agreement

An agreement signed by the original United Nations members in 1944 that established the International Monetary Fund (IMF) and the post-World War II international monetary system of fixed exchange rates.

Bretton Woods Agreement

An international agreement on monetary and currency policy for the period following World War II. Initially crafted in 1944 while the war was ongoing, it came into effect the following year. Among other things, the Bretton Woods Agreement created the International Monetary Fund and the International Bank for Reconstruction and Development. The latter organization was created to finance post-war reconstruction, while the IMF was intended to stabilize exchanges rates between currencies and to serve as a country's lender of last resort.

A key component of the Bretton Woods Agreement was the requirement that all countries peg their currencies to a certain amount of gold. In practice, most currencies were pegged to the U.S. dollar, which was itself pegged to gold. This helped the IMF accomplish its stated goals to stabilize currencies that had experienced a large amount of wartime inflation. The Agreement worked relatively well until the United States unilaterally depegged from gold in 1971. See also: Keynesian economics, Nixon shock.
References in periodicals archive ?
On 15 August 1971 US President Richard Nixon unilaterally pulled the plug on the Bretton Woods system, breaking the link between the US dollar and gold.
And within the U.S., Bretton Woods was sugar coating on the bitter pill of internationalism, for which distaste lingered from the interwar period of "America first" isolationism.
Add to that the deafening silence from the largest European countries on the issue, and it is possible that emerging economies, particularly China, will give up on advocating reform from within the Bretton Woods system.
The Bretton Woods conference led to the setting up of IMF, World Bank.
In fact, Keynes had limited influence on the conference, and Britain may well have gotten the loan without the Bretton Woods agreements.
But it was actually the Bretton Woods ways that drove China and 58 member countries to form the AIIB this year.
On September 26, 2008, French President Nicolas Sarkozy, then also the President of the European Union, called for rethinking a financial system from scratch, as at Bretton Woods. On October 13, 2008, British Prime Minister Gordon Brown echoed the same.
In a draft memo that would be the precursor to the Bretton Woods agreement for international monetary cooperation, White (1942: 46) argued that prosperity should be built on a solid monetary foundation of stable exchange rates:
Talal Abu-Ghazaleh, chairman of Talal Abu-Ghazaleh Organization (TAG-Org), was invited to become a member of the Bretton Woods Committee.
China is going to export capital, and either the US puts it to good infrastructure use in a 'Bretton Woods III' system or the world will face continued poor growth and high asset prices.
Meanwhile, the representative of the 24 Group (of member states of the World Bank and the IMF) has presented a report on the finance for development and growth (which includes all the society sectors) and the role of loan policies at Bretton Woods institutions.
The world has changed considerably since political leaders from the 44 Allied countries met in 1944 in Bretton Woods, New Hampshire, to create the institutional framework for the post-World War II economic and monetary order.