Bretton Woods System

Definition

The Bretton Woods System was a monetary management system that established rules for commercial and financial relations among the world's major industrial states in the mid-20th century. It set up procedures for fixed exchange rates and created the International Monetary Fund (IMF) and World Bank.

Analogy

Think of it as a group of friends agreeing on how to split costs when they go out, with one friend (the U.S.) having more say because they're paying more. The IMF is like a shared piggy bank everyone contributes to, just in case someone can't cover their share.

Related terms

International Monetary Fund (IMF): An international organization aimed at promoting global economic growth and financial stability, encouraging international trade, and reducing poverty.

World Bank: An international financial institution that provides loans and grants to poorer countries for capital programs with the goal of reducing poverty.

Fixed Exchange Rate: A regime where the value of a currency is matched to the value of another currency or gold.