The Bretton Woods Agreement is a pact that was made all the way back in the 1940’s by the economic powers at that time to stabilize currencies. What it did was establish a fixed exchange rate for currencies in terms of gold to make trade among nations easier. This kind of exchange rate system lasted until 1971, before the US finally decided to end the convertibility of the dollar to gold.While this agreement may have been beneficial at first, there were some underlying problems that led to its eventual downfall. One issue was that different countries had different production capabilities and therefore needed different amounts of money circulating within their economies. Another problem was that countries could no longer control their own monetary policies since they were now tied to other nations’ economies through this agreement. Lastly, fixing rates also caused deflationary pressures because if one country printed more money than it should have according to its quota, then prices would drop as everyone rushed to sell their currency holdings for gold instead."This system effectively came to an end in 1971 when President Richard Nixon announced that the U.S would no longer exchange gold for U.S currency due to concerns about America’s balance of payments deficit . However, even though it is no longer formally operational, many aspects of the Bretton Woods Agreement are still influential today . For example, IMF quotas continue play an important role in determining how much money individual countries can borrow from IMF lending facilities.
