The Bretton Woods Era — The Postwar Monetary Order

Delegates from 44 Allied nations opened the United Nations Monetary and Financial Conference at the Mount Washington Hotel, aiming to design a monetary order that would prevent the competitive devaluations and trade collapse blamed for the Great Depression and the war. The two rival blueprints were Britain's Keynes plan for an international currency ("bancor") and the American White plan for a dollar-centered gold standard; with the US holding two-thirds of the world's gold, the White framework prevailed.

Location: Bretton Woods, New Hampshire, USA

On the conference's final day the agreement was signed, establishing a system in which currencies were pegged to the US dollar, the dollar was convertible to gold at 35 dollars per ounce for foreign governments and central banks, and exchange rates could be changed only to correct fundamental disequilibrium. The International Monetary Fund was created to monitor parities and lend to deficit countries, and the International Bank for Reconstruction and Development — today the World Bank's core — was founded to finance reconstruction and development. The USSR signed but never ratified.

Location: Bretton Woods, New Hampshire, USA

Britain devalued the pound from 4.03 to 2.80 dollars — a 30 percent adjustment made in consultation with the IMF — after wartime debts, convertibility pressure, and dollar shortages exhausted its reserves. Devaluations by thirty other countries followed. The episode established that parity changes were possible within the system's rules, a flexibility Keynes had insisted on against the gold standard's rigidity.

Location: London, United Kingdom

Fourteen European countries restored current-account convertibility, completing the system's transition from postwar controls to full operation. The change ended the "dollar shortage" era and began a reverse flow: as foreign dollar holdings grew past US gold reserves, confidence in the 35-dollar parity came under recurring market strain.

Location: Europe

Economist Robert Triffin told the US Congress that the system contained a fatal dilemma: the world needed dollars for reserves, forcing the US to run deficits that would eventually exceed its gold and undermine confidence in the dollar. The first London gold crisis the same month — and the formation in 1961 of the eight-central-bank Gold Pool to defend the 35-dollar price — gave the critique immediate relevance. The "Triffin dilemma" became the standard explanation of the system's eventual collapse.

Location: New Haven, Connecticut, USA

After a run on gold drained the Gold Pool's reserves, central banks meeting in Washington dissolved the pool and created a two-tier market: official transactions continued at 35 dollars an ounce between central banks, while the free market price was left to float — reaching roughly 44 dollars that year. The dollar was now convertible to gold only in a nominal, official sense, and the system's core promise was visibly eroding.

Location: Washington, D.C., USA

President Richard Nixon announced the suspension of dollar-gold convertibility, paired with a 10 percent import surcharge and a 90-day wage-price freeze, stating the measures were needed to defend the dollar against speculators and protect American jobs. Presented as a temporary defense, the "Nixon shock" in fact ended the 35-dollar parity permanently. Foreign governments holding dollars no longer had a gold claim on the US Treasury.

Location: Washington, D.C., USA

At the Smithsonian Institution the Group of Ten agreed to devalue the dollar to 38 dollars per ounce of gold, revalue major currencies, and widen exchange-rate bands to 2.25 percent; Nixon called it "the most significant monetary agreement in the history of the world." Speculative flows overwhelmed the new parities within fourteen months, and after a second dollar devaluation (to 42.22 dollars) the major currencies began floating in March 1973.

Location: Washington, D.C., USA

IMF member countries meeting in Jamaica formally amended the Fund's articles to allow floating exchange rates, ended the IMF's role in gold, and authorized the sale of Fund gold holdings. The changes ratified what markets had already decided: currencies would no longer be pegged to gold or, through it, to each other. The dollar nonetheless remained the dominant reserve currency, an outcome of network effects the agreements neither required nor revoked.

Location: Kingston, Jamaica

The IMF and World Bank, the institutional children of Bretton Woods, outlived the monetary system and grew into the central lenders and development banks of the global economy. The system's collapse coincided with the inflationary 1970s, fueling decades of debate over monetary rules, and later proposals — from Keynes's bancor idea to debates over the euro and the renminbi — continued to measure themselves against the Bretton Woods design.

Location: Global