From Dollar Shortage to Dollar Glut

During the Second World War, policymakers in several countries developed alternative frameworks to govern monetary and financial relations between nations after the war. In 1944, representatives of 44 nations met at Bretton Woods, New Hampshire to create a new international monetary system. The Bretton Woods arrangements strongly reflected the preferences of the US government. This was not accidental. The United States was the dominant economic and military power at the time. The dollar was the key currency in the system; its value was tied to gold. All of the other currencies had fixed exchange rates relative to each other and relative to the dollar. But, it would be more than a decade before currencies would become fully convertible.