Bretton Woods System

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MM202 International Business


Essay Topic No. 2 Describe the most important features of the Bretton Woods Agreement. Why did the Bretton Woods ‘system’ break down and what has replaced it?

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In July, 1944, 730 delegates from the 44 Allied nations got together and hold an international conference (Bretton Woods conference) for three weeks in Bretton Woods, New Hampshire. During this conference, Bretton Woods Agreement was signed and passed (Investopedia, 2005, para.1). The Bretton Woods Agreement is an agreement which regards U.S. dollar as a central part of international monetary system after the Second World War. It then established a capitalist world’s monetary system called Bretton Woods system. This system was a Gold Exchange Standard. It relied on U.S. dollar and gold, then treated U.S. dollar and gold as solid foundation (Investopedia, 2005, para.2).The core content of Bretton Woods Agreement is liberalization of foreign exchange, capital account liberalization and trade liberalization. Its original purpose is to rebuild the world after the World War II though a series of currency stabilization programs and infrastructure loans to war-ravaged nations (Investopedia, 2005, para.3). Bretton Woods Agreement's major outcomes comprise the International Monetary Fund and the International Bank for Reconstruction & Development’s formation, moreover, it suggested introducing an adjustable pegged foreign exchange rate system (Wiggin, 2006, para.3).The establishment of the Bretton Woods system promotes the capitalist world's economic recovery and development after the World War II. This essay will discuss the most significant features of the Bretton Woods Agreement, in addition, it will illustrate why Bretton Woods system broke down and what has replaced it.

A. The most important features of the Bretton Woods Agreement There are six important features of the Bretton Woods Agreement. The first feature of the...
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