America’s Betrayal of the Bretton Woods System

TEHRAN (Iran News) This system was designed in 1944 at a conference held in Bretton Woods, New Hampshire, USA, with the participation of representatives from 44 countries. The main objectives of the Bretton Woods system were:

Exchange rate stability, meaning the prevention of severe fluctuations in balances and exchange rates that could harm international trade.

Facilitating postwar economic reconstruction, which was considered assistance for rebuilding the economies of Europe and Japan.

Increasing economic cooperation and preventing nationalist economic policies that would harm other countries.

Under this agreement, each country fixed the exchange rate of its currency to the US dollar (with a limited fluctuation of ±1%).

Thus, the US dollar was the only currency convertible into gold (at a fixed rate of $35 per ounce of gold).

This made the US dollar the world’s primary reserve currency. Subsequently, two important institutions were created for oversight and assistance:

The International Monetary Fund (IMF) to help countries facing balance-of-payments deficits.

The World Bank, to provide financing for development and reconstruction projects.

However, this system came under unilateral pressure from the United States in the 1960s and early 1970s and ultimately collapsed.

In essence, the United States betrayed the 43 countries of the world that were strategic partners in this agreement.

In the US Treasury, there was insufficient gold relative to the volume of dollars held abroad (due to the costs of the Vietnam War and domestic programs), and that gold had been secretly spent.

With the US balance-of-payments deficit and the declining confidence in the ability to convert dollars into gold, the world was confronted with a fait accompli and was astonished.

In 1971, US President Richard Nixon decided to halt the convertibility of the dollar into gold, an event that became known as the Nixon Shock.

It can be said that this betrayal of the global economy marked the end of the Bretton Woods system, after which a system of floating exchange rates replaced it.

The institutions that remained from that great agreement—the International Monetary Fund and the World Bank—continue to operate under US monetary policies and play an important role in the global economy.

The US dollar has remained the world’s primary reserve currency, as American pressure caused oil to be traded in dollars.

In summary, the Bretton Woods system was a framework for managing the global economy after the war, based on exchange rate stability and the gold backing of the dollar. However, due to structural problems and imposed economic pressures, it collapsed after about three decades. Today, as a result of this betrayal, the world carries $315 trillion in unpayable debt.