They hope that the Summit of the Top 20 Economies, to be held saturday in Washington, will lay the groundwork for a new international financial settlement, similar to the 1944 agreement in the city of Bretton Woods. Despite its name, the World Bank has not been (and is) not the central bank of the world. At the time of the Bretton Woods agreement, the World Bank was created to lend to European countries devastated by the Second World War. The World Bank`s focus has shifted to lending to economic development projects in emerging countries. The Bretton Woods Agreement of 1944 established a new global monetary system. It replaced the gold standard with the U.S. dollar as the global currency. It thus established America as a dominant power in the global economy. After the agreement was signed, America was the only country with the ability to print dollars. The Bretton Woods monetary management system established the rules governing trade and financial relations between the United States, Canada, Western European countries, Australia and Japan under the Bretton Woods Agreement of 1944. The Bretton Woods system was the first example of a fully negotiated monetary settlement designed to govern monetary relations between independent states. The main features of the Bretton Woods system were each country`s commitment to a monetary policy that kept its exchange rates within 1% by linking its currency to gold and the ability of the International Monetary Fund (IMF) to overcome temporary imbalances in payments. In addition, it was necessary to address the lack of cooperation between other countries and to avoid a competitive devaluation of currencies.

Gain the confidence you need to access a successful career in corporate finance. The Bretton Woods Agreement is one of those turning points in the development of modern financial systems, which established the dollar as the standard currency for world trade after World War II. While the Bretton Woods system was demanting during the Nixon administration, the financial institutions created by the Agreement – the International Monetary Fund and the World Bank – remain part of the finances of the 21st century. The Balance – Bretton Woods System and 1944 Agreement The Bretton Woods system is a series of uniform rules and guidelines that have provided the framework for the creation of fixed international exchange rates. Essentially, the agreement called on the new IMF to set the fixed exchange rate for currencies around the world. Each country represented assumed responsibility for maintaining the exchange rate, with incredibly narrow margins above and below. Countries struggling to stay within the fixed exchange rate window could ask the IMF for an adjustment in interest rates for which all allied countries would then be responsible.