Bretton Woods System Timeline

Economists and planners recognized in 1944 that the new system could begin only after the disruption of World War II had subsided and economies returned to normality.

Representatives of the leading Allied states favored regulated fixed exchange rates indirectly disciplined by a U.S. dollar tied to gold, relying on controls over currency values.

Image source: Bretton Woods system

Delegates from 44 countries deliberated at Bretton Woods from 1 to 22 July 1944 over the rules for postwar commercial and monetary relations.

On the final day of the conference, 22 July 1944, delegates signed the Bretton Woods agreement, establishing the framework for a regulated system of fixed exchange rates.

The organizations created by the agreement became operational in 1945 after enough participating countries had ratified the agreement.

The United States agreed on 6 December 1945 to grant Britain $4.4 billion in aid. The British Parliament subsequently ratified the Bretton Woods Agreements later that December.

Image source: Anglo-American loan

The IMF was officially established on 27 December 1945 when the 29 participating countries signed its Articles of Agreement. It was intended to keep the rules and serve as the main instrument of international monetary management.

Image source: International Monetary Fund

When the IMF began operations in 1946, President Harry S. Truman named Harry Dexter White as its first U.S. Executive Director.

By 1947, the IMF and the IBRD were admitting that they could not by themselves deal with the international monetary system’s economic problems.

From 1947 to 1958, the United States deliberately encouraged an outflow of dollars; from 1950 onward it ran balance-of-payments deficits to provide liquidity for the international economy.

The IMF commenced its financial operations on 1 March 1947, beginning its role in the Bretton Woods monetary framework.

From 1948 to 1954, the United States provided 16 Western European countries with $17 billion in grants, supporting reconstruction within the emerging postwar economic order.

Image source: Marshall Plan

In 1950, the U.S. balance of payments swung negative, reinforcing the dollar outflows that supplied international liquidity.

The return to convertibility of Western European currencies at the end of 1958 and of the Japanese yen in 1964 set the stage for increased monetary interdependence.

The Eurodollar market grew from zero before 1957 to $80 billion in 1972, increasing the volume of offshore dollar claims beyond the system’s direct controls.

Robert Triffin observed in 1960 that holding dollars was more valuable than gold because continuing U.S. balance-of-payments deficits kept the system liquid and fueled economic growth.

With John F. Kennedy’s election in 1960, a decade-long effort began to maintain the Bretton Woods system’s gold price at $35 per ounce.

Eight governments created the London Gold Pool on 1 November 1961 in the first major effort to defend the official $35-per-ounce gold price.

Image source: London Gold Pool

Efforts to preserve the dollar’s gold peg culminated in the 1964 tax cut program, which was designed in part to maintain the $35-per-ounce parity.

Banks began forming international syndicates from 1964 onward, and by 1971 more than three-quarters of the world’s largest banks were shareholders in such syndicates.

In 1967, the IMF agreed in Rio de Janeiro to replace the tranche division that had been established in 1946.

After an attack on the pound and a run on gold in the sterling area, the British government was forced to devalue the pound on 18 November 1967.

Image source: Pound sterling

By 1970, U.S. gold coverage had deteriorated from 55 percent to 22 percent, making defense of the fixed $35-per-ounce peg increasingly untenable.

The continuing decline of the dollar reinforced the relative decline of U.S. power and dissatisfaction in Europe and Japan. By 1970, the United States held under 16 percent of international reserves.

In January 1968, President Lyndon B. Johnson imposed measures intended to end gold outflows and increase U.S. exports.

A dollar run on gold through London’s free market led to the dissolution of the London Gold Pool in mid-March 1968, after which private gold prices rose above the official dollar price.

On 18 March 1968, the U.S. Congress repealed the requirement that 25 percent of the dollar be backed by gold, weakening the system’s official foundation.

By November 1968, attempts to maintain the gold peg had collapsed. A new policy program sought to turn Bretton Woods into an enforcement mechanism for floating the gold peg.

In 1971, more dollars were printed in Washington and sent overseas to pay for military and social-program expenditures, intensifying pressure on the Bretton Woods system.

Image source: Nixon shock

During the first six months of 1971, assets worth $22 billion fled the United States, reflecting growing doubts about the dollar’s convertibility and fixed exchange-rate commitment.

On 15 August 1971, President Richard Nixon issued Executive Order 11615, imposing wage and price controls, a 10 percent import surcharge, and most importantly ending direct dollar convertibility into gold.

Throughout the fall of 1971, the Group of Ten conducted multilateral and bilateral negotiations to redesign the international exchange-rate regime.

In December 1971, the Group of Ten met at the Smithsonian Institution in Washington, D.C., and signed the Smithsonian Agreement in an attempt to preserve a revised fixed-rate system.

The virtual collapse of the Bretton Woods system in 1972 led to the creation of the Committee on Reform of the International Monetary System and Issues to advise on monetary reform.

Pressure from the gold free market continued after the Smithsonian Agreement. Following a 10 percent devaluation announced in February 1973, Japan and the European Economic Community countries decided to let their currencies float.

The end of the Bretton Woods system was formally ratified by the Jamaica Accords in 1976.

Later scholarship, including Barry Eichengreen’s work on gold fetters and currency wars, treated the major monetary events of the 1930s with greater nuance, including the role of devaluations.

During the 2008 financial crisis, policymakers including James Chace called for a new international monetary system, with some describing the proposal as Bretton Woods II.

In March 2010, Greek Prime Minister George Papandreou called for democratic governments to establish a new global financial architecture as bold as Bretton Woods, the European Community, and European monetary union.

Image source: George Papandreou

In 2011, IMF Managing Director Dominique Strauss-Kahn stated that boosting employment and equity had to be placed at the heart of the IMF’s policy agenda.

Following the 2020 economic recession, the IMF managing director described a New Bretton Woods Moment and called for coordinated fiscal responses by central banks to address the continuing economic crisis.