The period after the Second World War found the UK economy in ruins, its entire infrastructure was destroyed. The country's confidence in its currency was at a low level. On the other hand, the United States, thanks to its physical isolation, remained relatively untouched by the war. Their industrial might was probably ready to be turned on for civilian purposes. This led to a significant increase in the value of the dollar, which became the reserve currency of choice and held international financial markets together.
In July 1944, the Bretton Woods Agreement on the Post-war monetary System was concluded, 45 countries participated in it at the request of the United States; the conference formulated a new international financial structure. This structure was designed to ensure prosperity in the post-war period and prevent a repeat of the global depression of the 1930s.
Named after a resort hotel in New Hampshire, the Bretton Woods system gave official status to the US dollar as a new global reserve currency, fixing its value against gold. The United States assumed responsibility for ensuring convertibility, while other currencies were pegged to the dollar.
Among the key features of the new framework were:
- International Monetary Fund.
- The World Bank.