π The Bretton Woods monetary system was established in 1944 to create a post-WWII global monetary order.
π° Under the Bretton Woods system, the US dollar was tied to gold at $35 an ounce, but only foreigners could convert dollars into gold.
π± Fixed exchange rates were set for major currencies relative to the US dollar, creating an indirect gold standard.
π The Bretton Woods system established fixed exchange rates with adjustable pegs.
π° Countries could devalue their currency to restore balance in their trade deficit.
π Bretton Woods aimed for a rule-bound global monetary order with policy independence for individual nations.
βοΈ The Bretton Woods system was created in response to competitive devaluations during the 1930s.
π The system underwent a major change in 1958 with currency convertibility.
π₯ The adjustable pegs in the Bretton Woods system became disruptive once capital controls were abandoned.
π The Bretton Woods system faced challenges in managing exchange rates due to market speculation.
π° There was a dollar shortage in the earlier years of Bretton Woods, causing a currency shortage in the rest of the world.
π² The US dollar served as the global reserve currency, leading to US monetary policy prioritizing US interests over global interests.
π Under the Bretton Woods system, the US had the power to export inflation to the rest of the world, leading to a dollar shortage and later, too much inflation.
π° This imbalance of power resulted in US monetary policy being made in American interests rather than global interests.
π The Bretton Woods system collapsed in 1971 when the US closed the gold window, preventing the conversion of US Dollars into gold at a fixed price.
π‘ The Bretton Woods system was abandoned in 1971 when the United States broke the convertibility link due to pressure from France.
πΌ Overall, the Bretton Woods system was considered a success, as it helped stabilize the global economy after World War II and led to high economic growth and low volatility.
π However, the system had its limitations and could not have lasted in the long-term due to the reliance on capital controls and the dominant superpower status of the United States.
π The Bretton Woods system established key components such as the IMF, World Bank, and World Trade Organization.
π Search for Michael Bordo's work on Bretton Woods for more information.
π Further explore the topic through additional videos or by using Google.
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