The Bretton Woods Agreement

The Bretton Woods Agreement, established in 1944, was a system where countries agreed to link their currencies to the US dollar, which was backed by gold. This created stable exchange rates, making international trade easier. The US held gold reserves and pledged to exchange dollars for gold at a fixed rate. The goal was to prevent competitive devaluations and economic instability after World War II. The system lasted until the early 1970s, when the US ended gold convertibility, leading to the flexible exchange rates we see today.