Bretton Woods system

The Bretton Woods system was a system of currency exchange rates that existed from 1951 until 1973. The Bretton Woods system were an exchange rate system of fixed exchange rates.

All countries that participated in the Bretton Woods system had fixed exchange rates against each other. The objectives of the Bretton Woods system was to remove trade barriers, create exchangeable currencies and to have fixed exchange rates. The Bretton Woods system established IMF (International Monetary Fund), rules for exchange control and control of price fluctuations.

All participating countries should have a foreign exchange reserve and gold reserves that would guarantee currencies shiftability and used to equalize imbalances. All currencies in the Bretton Woods system was convertible to the USD, which in turn was convertible into gold.

The Bretton Woods system collapsed in 1973 due to differences in inflation between countries in the system. The United States had high inflation and a dollar crisis arose, everybody sold dollars but nobody whished to buy them.