Bretton Woods System

A system of fixed exchange rates across nations. It resembled the gold standard, which preceded it. Unlike a gold standard, in which the values of all currencies are tied directly to the price of gold, under Bretton Woods, all currency values were tied at a given exchange rate to the U.S. dollar. The dollar was then fixed in terms of gold (initially at $35 per ounce). The system was supported by IMF charter and lasted from 1945 to 1973. The immediate causes of the system’s demise were persistent U.S. balance-of-payment deficits and the reluctance of the United States to devalue, which led to speculative attacks against the U.S. dollar. See also gold standard and balance of payments.