It took close to 15 years to get the Bretton Woods system fully operating. The IMF, based on the principle of a credit union, whereby members could withdraw more than their original gold quotas, was established to provide relief for temporary current account shortfalls. The compromise gave members both exchange rate stability and the independence for their monetary authorities to maintain full employment. The compromise created an adjustable peg system based on the US dollar convertible into gold at $35 per ounce along with capital controls. The Articles represented a compromise between the American plan of Harry Dexter White and the British plan of John Maynard Keynes. The system was a compromise between the fixed exchange rates of the gold standard, seen as conducive to rebuilding the network of global trade and finance, and the greater flexibility to which countries had resorted in the 1930s to restore and maintain domestic economic and financial stability. It also sought to provide a framework of monetary and financial stability to foster global economic growth and the growth of international trade. It was established to design a new international monetary order for the post war, and to avoid the perceived problems of the interwar period: protectionism, beggar-thy-neighbour devaluations, hot money flows, and unstable exchange rates. The Bretton Woods system was created by the 1944 Articles of Agreement at a global conference organised by the US Treasury at the Mount Washington Hotel in Bretton Woods, New Hampshire, at the height of WWII. In a recent paper, I revisit these issues from over a half century ago (Bordo 2017). Many commentators hark back to the lessons of Bretton Woods as an example to possibly restore greater order and stability to the present international monetary system. Yet Bretton Woods was short-lived, undone by both flaws in its basic structure and the unwillingness of key sovereign members to follow its rules. Scholars and policymakers interested in the reform of the international financial system have always looked back to the Bretton Woods system as an example of a man-made system that brought both exemplary and stable economic performance to the world in the 1950s and 1960s.
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