Many of the tenacious economic institutions we see today were created as a result of the Bretton Woods agreement. Institutions such as the International Monetary Fund (IMF) and the World Bank were created as a result of this agreement. One of the effects of the constant surpluses in the balance of payments was a subsequent rise in inflation, due to increased remittances to non-reserve countries. Expansionary monetary policy in the United States and its inflationary effects are exported to non-reserve countries because of the fixed exchange rate system. This effect has not been welcomed by non-reserve countries such as Great Britain, France and Germany. Situation: European countries fought during the Second World War. As such, the world`s economies had been destroyed. Many countries had money to finance the war spending of the humungous. As a result, once the war is over, many European economies risk imploding simply because their money markets are unstable. To avoid such an outcome, all the countries of the world where all leading leaders and economists held a conference in Bretton Woods in the United States. This was known as the Bretton Woods Conference and had a huge impact on the future monetary system and forex market development. In July 1944, delegates from 45 Allied powers participating in World War II met in Bretton Woods, New Hampshire, United States, to plan the economic institutions deemed necessary to support the reconstruction, development and growth of the post-war economy. Especially the instability of the international economic system after the First World War, including the experience of hyperinflation as in Germany from 1922-1923 and the global depression of the 1930s.
A necessary element to prevent the mistakes of the past from happening again was the introduction of a fixed exchange rate system. Fixed exchange rates could not only help prevent inflation, but also remove uncertainties in international transactions and thus contribute to the expansion of international trade and international investment. It was also hoped that economic interdependencies would make it more difficult for nationalism to assert itself again. The Bretton Woods system was one of the most popular agreements between countries to form a formal monetary system. However, it was only able to survive for a period of 27 years, that is, until 1971. The Bretton Woods system was officially terminated after Nixon`s shock, when the United States unilaterally degreased the world of the gold standard. We can learn a lot about the planned operation of the system by looking at the collapse of the system.