The Bretton Woods System

Giovanni Battista Pittaluga and Elena Seghezza
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Giovanni Battista Pittaluga: University of Genoa
Elena Seghezza: University of Genoa

Chapter Chapter 5 in Building Trust in the International Monetary System, 2021, pp 119-168 from Springer

Abstract: Abstract As the end of World War II approached, the Allies, and in particular the USA, were determined to create a new international monetary order. Many believed that, in the 1930s, the worldwide transmission of deflation and the frequent recourse by countries to competitive devaluations had contributed to the Great Depression. The goal of the USA and Great Britain was to develop a new international monetary system. The crucial aspect of the system, based on the Bretton Woods Agreements of 1944, lies in the fact that, for the first time, it was an attempt at a “legalization” of international monetary affairs: a set of rules and institutions, shared and accepted by a large number of countries, that aimed at ensuring the functioning of an international payment system. This made it possible to introduce, at the international level, innovative payment systems based, rather than on commodity money, as in the gold standard, on a fiat money, the dollar. Over time, the changing dynamics of inflation and productivity made the Bretton Woods system less attractive to the advanced countries, in particular the USA. On August 15, 1971 President Nixon suspended the convertibility of the dollar and the Bretton Woods system ended.

Date: 2021
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DOI: 10.1007/978-3-030-78491-1_5

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