Bretton Woods system
The postwar monetary order, set up in 1944, pegging member currencies to the US dollar, itself convertible to gold at $35 an ounce.
Marshall Plan: The 1948–1952 US economic aid program that rebuilt Western European economies, distributing about $13 billion in grants. Plan dollars relieved European balance-of-payments shortages, giving the pegged currencies the reserves the system demanded.
Gold standard: A monetary regime fixing a currency's value in gold, dominant before 1914 and abandoned during the interwar years. Bretton Woods was a modified gold standard, with only the dollar directly convertible.
Great Depression: The worldwide economic collapse after 1929, deepened by competitive devaluations and trade barriers. Beggar-thy-neighbor devaluations during the Depression were the failure Bretton Woods was designed to prevent.
Harry Dexter White: The US Treasury economist whose blueprint, favoring American interests, prevailed over Keynes's at Bretton Woods. White chaired the technical work and his draft became the final agreements.
Floating exchange rates: Exchange rates set by currency markets without official pegs, the dominant regime since 1973. The regime that replaced Bretton Woods; many economists had predicted floating earlier.
Collapse of Bretton Woods: The 1971–1973 breakdown when the United States suspended dollar–gold convertibility and floating exchange rates replaced the pegs. The system lasted only until US deficits drained American gold reserves past sustaining.
Fixed exchange rate: An exchange rate set by government commitment rather than markets, adjustable only in cases of fundamental disequilibrium. Each member pegged its currency within one percent of its declared dollar par value.
United Nations Monetary and Financial Conference: The July 1944 conference of 44 Allied nations at Bretton Woods, New Hampshire, that drafted the system. The three-week negotiation produced the IMF and World Bank charters.
John Maynard Keynes: The British economist whose clearing-union proposal lost at Bretton Woods but shaped the debate. Keynes led the British delegation and proposed bancor, an international currency the Americans rejected.
Keynesian economics: The economic doctrine favoring government management of demand, which informed but did not dictate the Bretton Woods design. Keynes wanted international, not merely national, demand management; the Americans narrowed the scope.