The Bretton Woods System Video Lecture | Business Economics for CA Foundation

after World War two it was clear the
world needed a new financial system the
gold standard was considered too rigid
but at the same time economists were
worried that countries would devalue
their currency to boost exports for this
reason 44 countries sent delegates to a
conference held in Bretton Woods New
Hampshire as of the 1st of July 1944 the
US which held two-thirds of the world's
gold reserves after the war was
obviously the most influential player
and ultimately all currencies ended up
linked to the dollar and the dollar was
linked to gold one important concern
arose though if a country goes through
an economic crisis how can it get out of
it without devaluing its currency to
address this issue two institutions were
created one the International Monetary
Fund which was supposed to lend money to
countries that are in trouble and cannot
attract financing from other sources to
the International Bank for
Reconstruction and Development which is
now called the World Bank and was
supposed to help less developed country
scrub unfortunately as good as it may
have sounded on paper the Bretton Woods
system didn't survive because the United
States kept running deficits to fund
various projects and therefore the
amount of dollars in existence kept
increasing while the gold reserves of
the u.s. kept shrinking as more
countries demanded gold in exchange for
their dollars as such on the 15th of
August 1971 Nixon officially announced
that dollars would no longer be
convertible to gold thereby putting the
final nail in the coffin of the Bretton
Woods system
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