The dollar has been the world's reference currency since the Bretton Woods agreement
in 1944, when various key units were fixed to the value of the greenback.
At the end of the second world war, and the rise of the US as a superpower, and according to the Bretton Woods Agreement
for the cash management of the exchange rate signed in 1944, the US dollar became the currency of the cash reserves of countries.
This month marks the 75th anniversary of the signing of the Bretton Woods agreement
, which established the International Monetary Fund and the World Bank.
The Bretton Woods agreement
of 1944 imposed fixed exchange rates on the western world.
For two decades after the World War II, many of the major currencies were fixed under the Bretton Woods Agreement
Yet, after the communist revolution in China and the Soviet Union's failure to ratify the Bretton Woods Agreement
, the IMF and the World Bank went in a different direction.
Congress passed Public Law #95-435, The Bretton Woods Agreement
Act, on October 10, 1978.
Debesh Bhowmik contextualizes the historical evolution of monetary systems by explaining silver standard, bimetallic standard, gold standard, Bretton Woods agreement
, Special Drawing Rights (SDR), etc.
In a draft memo that would be the precursor to the Bretton Woods agreement
for international monetary cooperation, White (1942: 46) argued that prosperity should be built on a solid monetary foundation of stable exchange rates:
e Bretton Woods agreement
after the war had been totally abandoned in favour of a free for all and much toxic practice.
The American dollar prevailed and was the only currency converted into gold after the war, throughathe Bretton Woods Agreement
,awhich gave the dollar privilege and led to an easy money policy where the US simply printedathe dollar, leading to the collapse of the agreement in 1971, andathe stock market and real estate bubble in Japan in the late 1980s.
In fact, the very launch of such an institution will be interpreted as a symbolic challenge to the existing global monetary system set up under the Bretton Woods Agreement
. While China is eager to ensure that the newly unveiled financial institution, with an initial corpus of $50 billion, is headquartered in Shanghai, India on the other hand is pitching for the organization to be based out of either New Delhi or Mumbai.