The value of your money is still tied to this World War II agreement
What is Bretton Woods?
The Bretton Woods Agreement was negotiated in July 1944 by 44 countries at the United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire.
Under the agreement, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value.
The collapse
In 1971, concerned that the U.S. gold supply might not be enough, President Nixon devalued the U.S. dollar relative to gold. After a run on gold reserve, he declared a temporary suspension of the dollar’s convertibility into gold. The removal of the gold standard allowed the U.S. government to create money at-will, regardless of debt, leading to inflation.
By 1973, the Bretton Woods System had collapsed and major currencies started floating against each other and against the U.S. dollar.
Why does it matter now?
Some exchange rates, for example the Euro compared to the U.S. dollar, were a byproduct of the agreement.
Plus, the Agreement created the International Monetary Fund and the World Bank, which played an important part in helping rebuild Europe after World War II and still serve global government interests.
Sources:
Federal Reserve History: Creation of the Bretton Woods System
IMF: The end of the Bretton Woods System (1972–81)
Investopedia: Bretton Woods Agreement and the Institutions It Created Explained
Corporate Finance Institute: Bretton Woods Agreement
U.S. Money Reserve: What Is Bretton Woods?
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