Bretton Woods and the “System”
It is important to distinguish between European and North American philosophies surrounding inflation and monetary policy during the post-World War II period. Europe’s philosophy was driven by Germany’s experience with hyperinflation in the 1920s and the collapse of the domestic currency. The North American experience was defined by the Great Depression of the 1930s and the boom-bust phenomenon that led to it, with the appropriately named Roaring Twenties culminating in the crash of the U.S. stock market in 1929.
These spectrum-defining philosophies set the stage for the postwar era and the monetary system as we know it. During July 1944 in a somnambulant setting known as Bretton Woods, not far from Mount Washington in New Hampshire, the soon-to-be post-World War II Allied nations met to discuss and define a new global monetary system, to be put in place once victory over the Axis powers had been secured.
In Bretton Woods, the foundation was laid for the construction of the International Monetary Fund (IMF), the World Bank, and the International World Organization, which later morphed into the World Trade Organization (WTO).
In all, 730 delegates from the 44 Allied nations gathered at the Mount Washington Hotel, and following three weeks of intense negotiations, the Bretton Woods System was born. Achieving agreement on the structure of the postwar monetary system was far from easy. Essentially, at issue, was the balance of monetary power ...