The Bretton Woods agreement of 1944 established a new international monetary system. It replaced the gold standard with the U.S. dollar as the global currency. By so doing, it established America as the dominant power in the world economy. After the agreement was signed, America was the only country with the ability to print dollars.
The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations that would monitor the new system.
- The creation of Bretton Woods resulted in countries pegging their currencies to the U.S. dollar.
- In turn, the dollar was pegged to the price of gold, and the U.S. became dominant in the world economy.
- The U.S. was the only nation that could print the globally accepted currency, and countries had more flexibility than they did with the old gold standard.
- When the dollar ceased to be pegged to the price of gold, it became the monetary standard with other currencies pegging their currencies to it.
Frequently Asked Questions (FAQs)
What was the Bretton Woods Agreement?
The Bretton Woods Agreement was a 1944 meeting of the Allied nations, in which the nations agreed to peg their currencies to the dollar while the dollar was pegged to gold. The agreement went into effect in 1958 but lasted less than 20 years.
What is the gold standard?
The gold standard was a currency measurement system in place in the United States up until the 1970s when the value of the dollar was tied to gold. At the time of the Bretton Woods Agreement, one dollar was worth 1/35 of an ounce of gold.