United States dollar and the legacy of Bretton Woods

The 1944 Bretton Woods Conference established a global monetary system that positioned the United States dollar as the primary reserve asset. Under this agreement, the dollar was pegged to gold at a rate of $35 per ounce, and other currencies were fixed against the dollar, subject to adjustment via the International Monetary Fund (IMF).

Key figures in the negotiations included John Maynard Keynes, representing the United Kingdom, and Harry Dexter White, representing the United States. While the system required the U.S. to maintain a balance of payments deficit to provide global liquidity, the arrangement became increasingly vulnerable in the 1960s as dollar liabilities exceeded U.S. gold reserves. Keynes had originally proposed a neutral reserve currency called ‘Bancor’ to prevent any single national currency from dominating the international system.