Bretton Woods System

Bretton Woods System of Monetary Management established the rules for financial and monetary relations among the world's major industrial states in mid 20th Century. It was the first fully negotiated plan of its kind so as to govern and emphasize the monetary stimulus of the global economy. The International Monetary Fund(IMF) was established by the planners of the Bretton Woods so as to regulate international monetary activities.

The basic feature of this Management System was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a predefined fixed value with minor deviations. Considering US Dollar as the major Currency of exchange, the allied countries had to exchange the funds through US Dollar so as to maintain currency approximation.

The basic aim of Bretton Woods was to disburse power and influence among the countries and to bring out countries ready to lead the global economy after Great Depression and World War 2. In initial times the favored mechanism was to impart Capitalism. For a pur Capitalistic Economy intervention of public sector was very important. In initial cases France demanded for state intervention leading to a lesser Capitalistic environment.

All the participating governments at Bretton Woods agreed that the monetary chaos of the interwar period had yielded several valuable lessons.

So as to keep the global economy away from the chaos it has just emerged from. So as to implement this strategy many of the most vital trading options were to be sacrificed. Trade in the 1930s became largely restricted to currency blocs. These blocs retarded the international flow of capital and foreign investment opportunities. Although this strategy tended to increase government revenues in the short run, it dramatically worsened the situation in the medium and longer run.

Seeing and experiencing the above impact, countries started to consider the importance of Government Intervention in Economic matters.

The various activities included in the Charter of Bretton Woods System are:

1. To understand and simplify Fixed Rate Changes.
2. To understand the complexity of Trade.
3. To design a Charter for effecient working of International Monetary Fund.
4. To plan Financing of Trade Deficits.
5. Reconstruction and Development of Developing Nations.

Bretton Woods was a very important part in restructuring of Financial and Economic global system. But it had an implication which led to high imbalance in Balance Of Payments. Also the Dollar to Gold ratio started to weakening when France demanded Gold supervised by US. There were many other factors and many more implications.

So as to mitigate the above condition's impact a parallel monetary system was implemented for all Traded Funds by International Monetary Fund(IMF). The system till now is implemented and various consequences have been handled successfully with an active cooperation and assistance with leading NGOs.