Bretton Woods

An agreement struck in the summer of 1944, in which the U.S., the U.K., and their wartime allies set up the rules for the post-World War II monetary system. The meeting set the structure for the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which in the U.S. is more commonly known as the World Bank. The comprehensive agreement called for the participants to limit the movement of their currencies, which were set against the dollar. The gold standard was maintained and the dollar retained its value of $35 to an ounce of gold. That standard allowed the U.S. to finance its balance of payments deficit by using dollars instead of gold. However, the U.S. also retained the responsibility of converting dollars into gold on demand from foreign central banks. The name Bretton Woods comes from the city in New Hampshire where the wartime allies met.