Bretton Woods system: how it all began

A number of experts know that long before the Bretton Woods system arose, there was a time of gold standard on our planet when the pound sterling could be freely exchanged for gold. Britain at that time was a strong world power, so could afford such operations. However, everything changed in 1914, when during the First World War, the currency of the United States came to the financial arena, which spread to North and Latin America.

In 1922, an attempt was made to create a reserve currency and a gold standard based on the pre-war model. In 1925, England introduced the gold standard for the pound, secured by gold and reserve currency (US dollars). However, in 1929, America collapsed on the exchange, and in 1931 a panic began on the London financial market, which finally gave the pound a secondary role after the dollar. In 1931, 1933 in the United Kingdom and the United States, respectively, the gold standards were abolished; Exchange rates became floating, which served as the basis for future forex systems. Attempts to create a gold convertibility of currencies by European countries failed (in 1936, the collapse of the "Golden Bloc", which included a number of countries, including France, Holland, etc.).

By the end of the 1940s, due to the financial crises of the thirties and the Second World War, there was a need in the world for a radical renewal of the financial system. And in this connection, in 1944, the Bretton Woods Conference was convened, at which it was decided to link the currencies of 44 countries to the dollar, and the dollar to gold at a rate of $ 35 per troy ounce (31.1034 grams). After World War II, the United States concentrated the predominant share of the world's gold reserves, which gave this country grounds for world leadership. In December 1944, the Bretton Woods system began its work.

At the conference in 1944, a provision was adopted on the establishment of two organizations that will exercise supervisory functions and provide means to stabilize the national currency to the member countries of the agreement. They were the International Monetary Fund, as well as the International Bank for Reconstruction and Development. The Bretton Woods system assumed that gold remains the final means in international settlements, that national currencies freely circulate, that national currencies have fixed rates to the dollar, and central banks support this rate (+ 1 percent).

However, by the mid-1970s gold reserves had been redistributed to other financial centers (European and Asian), and thus Triffin's theorem was broken that the currency issue should be compared to the gold reserve of the country that produced this emission. The Bretton Woods system began to lose its relevance, which was intensified by speculative operations, the instability of the balance sheets of the member countries, and the currency crisis of 1967. This creates the prerequisites for changing the existing world monetary system, which the US has been supporting for many years by force of arms, Gold reserve, equivalent to the emission of dollars, they have not been there for many years.