The Bretton Woods Conference in 1944 established the IMF and World Bank to stabilize the post-war economy and promote global cooperation. Delegates from 44 nations aimed to prevent future conflicts by creating a new financial order, leading to a period of economic growth and the dominance of the US dollar.
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The economic disruptions of the 1920s and 1930s, including the collapse of the gold standard and the rise of protectionist policies, led to the need for a stable international financial system
Harsh Reparations Imposed on Germany
The harsh reparations imposed on Germany by the Treaty of Versailles, which demanded 132 billion gold marks, led to hyperinflation and economic hardship, setting the stage for political extremism
The Great Depression
The Great Depression further destabilized the global economy, leading to mass unemployment, bank failures, and a decline in international trade due to protectionist tariffs
The Bretton Woods Conference aimed to establish a new international economic order to promote cooperation and prevent future conflicts
The IMF was established to monitor and stabilize exchange rates and provide financial assistance to countries facing economic difficulties
Currencies were pegged to the US dollar, which was convertible to gold at a fixed rate, allowing for adjustments in exchange rates to correct imbalances in a nation's balance of payments
Over time, the IMF's role expanded to include promoting international trade and economic growth
The IBRD was initially focused on the reconstruction of Europe after World War II, but its mission grew to encompass development and poverty reduction worldwide
Membership in the IBRD was contingent upon joining the IMF, and a system of quotas based on each country's financial contribution determined members' voting power and borrowing capacity within both institutions
The IBRD, also known as the World Bank, continues to play a crucial role in global financial governance and discussions about reforming the global financial architecture
The Bretton Woods system came under pressure due to the United States' persistent balance of payments deficits and inflation
In 1971, President Richard Nixon suspended the convertibility of the US dollar into gold, marking the transition to floating exchange rates
Despite the transition to floating exchange rates, the US dollar remains the dominant currency in international finance
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Location and date of Bretton Woods Conference
Mount Washington Hotel, Bretton Woods, New Hampshire, USA; July 1944
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Number of delegates and nations at Bretton Woods
730 delegates from 44 Allied nations
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Economic issues addressed at Bretton Woods
Collapse of gold standard, rise of protectionism, interwar economic disruptions
