THE BRETTON WOODS

SYSTEM
 Introduction

Harry Dexter John Maynard

White Keynes
 Events leading up to the
conference

Restrictive market practices which caused the

devaluation, deflation and depression that
defined the economy of the 1930s.

World War II

The gold standard

 Goals of the Conference

Intended to govern currency regulations and

establish legal obligations (through the IMF)

Set a standard for exchange rates

Establish international monetary cooperation

Money pool from which member nations can

borrow funds
 Outcome
(formally established December 27, 1945)

Adjustable peg currency

Quotas embedded in the IMF
Members were forbidden to engage in
discriminatory currency practices
The creation of the IMF and World Bank
The dollar standard
 Problems

Post-war monetary relations

were unstable

The member nations

underestimated the strength
of their funds... after two
years of lending, the IMF was
drained of its money
 The Implied Bargain
US's allies acquiesce to this
The U.S. hegemonic system because it
becomes a global benefits their own economies
hegemon due to
strength of the
dollar

U.S. allows allies

U.S. is able to act use of the system
unilaterally to for their own benefit
secure its own
interests
 The End of the Bretton Woods
System
Due to the costs of the Vietnam War and nations
trading dollars for gold.

The link between gold and the dollar is severed.

Flexible exchange rates allow for countries to

adjust to increased prices.

The formation of the European Monetary System.

 The World Bank and IMF are still
active, although they have been
severely criticized for some of their
policies
THANK YOU