The Bretton Woods system established in 1944 aimed to govern international monetary and exchange rate regulations through institutions like the IMF and World Bank. It intended to set a fixed exchange rate between currencies pegged to the U.S. dollar, which was pegged to gold. This was expected to promote international cooperation and financial stability. However, the system broke down in the 1970s as countries could no longer maintain the required exchange rate adjustments due to large balance of payments crises, replacing it with floating exchange rates.

1. Presented By-
Sanjog Zimbar
THE BRETTON
WOODS SYSTEM

2. CONTENT
• Introduction
• Goals of conference
• Expected benefit
• Outcome
• Problems
• Evaluation and Breakdown.
• Example

3. KEY ACTORS
Harry Dexter
White
(US)
American Minister
of state
John Maynard
Keynes
(GB)
British Economist

4. INTRODUCTION
• Bretton wood system established in 1944.
• Large capital movement and less controllable.
• Requirement of stabilizing system.
• Financial security and stable situation.
• Restructure international finance and currency
relationships.
• Implementing a system of fixed exchange rates with
the U.S. dollar as the key currency.

5. GOALS OF CONFERENCE
• Intended to govern currency regulations and establish
legal obligations (through the IMF).
• Set a standard for exchange rates. (1 ounce gold= $35)
• Establish international monetary cooperation.
• Money pool from which member nations can borrow
funds.

6. EXPECTED BENEFIT FROM THE SYSTEM
• Through capital controls, the
countries would pursue the full
employment and price stability
(low inflation) and the external
balance (keeping exchange rates
stable) simultaneously.

7. OUTCOME
• Quotas embedded in the IMF.
• Several conferences dealing with the world monetary
problems caused by the ‘Great Depression’ had ended.
• The creation of the IMF and World Bank.
• The dollar standard.

8. PROBLEMS
• Occasional devaluations under the supervision of the
IMF to remove “fundamental disequilibria” in the
balance of payments (BOP).
• United States free from external economic pressures.
• Countries were not willing to accept the high inflation
rates.
• Countries no longer based this value on gold.

9. EVOLUTION AND BREAKDOWN
• The reserves of most countries became a mixture of
gold and dollars.
• In 1958, countries in Europe completed the
restoration of convertibility.
• National interest rates were closely linked with each
other due to the opportunity to move funds across
borders.
• In 1970s the balance of payment crisis were so massive
that finally countries couldn’t keep up with the
adjustments, so the system collapsed and replaced
with a regime of floating exchange rates

10. EXAMPLE
If Britain devaluated pound due to a CA deficit, the
foreign currency value of pound assets would
decrease, thus savings would shift into other
currencies. In order to hold the pound’s exchange
rate against the dollar pegged, the Bank of England
should sell foreign assets to market and buy pounds
instead. Now, without enough reserves, the foreign
reserves’ loss might cause a devaluation, if large
enough

11. THANK YOU…….!