for those unfamiliar with the bretton woods summit (officially the united nations monetary and financial conference), it essentially laid-out the foundation of our modern (open) global financial system. it took place just after the second world war (1944) and the monetary system it created was in-place through 1971.
the key objective was to facilitate a more open global economy and one in which the leading (read: western/industrialized/democratic) economies would cooperate in governing and maintaining the system. given the timing, it had a particular focus on (and was quite effective in) helping rebuild post-war economies (namely germany and japan), through policies which helped lower barriers to trade and capital movements during those periods of rapid redevelopment.
some high-level details and history; adapted from wikipedia [1]:
The plan involved nations agreeing to a system of fixed but adjustable exchange rates where all currencies were pegged against the US Dollar, with the dollar itself convertible into gold (in effect a gold-dollar exchange standard).
Two significant international financial institutions, the International Monetary Fund and The Bank for International Settlements (precursor/current component of the World Bank) were created; a key part of their functions were to replace private finances with more reliable source of lending for investment projects in developing postwar states.
The new exchange rate system allowed countries facing economic hardship to devalue their currencies by up to 10% against the dollar (more if approved by the IMF), thus preventing them from deflating their currencies to stay on the gold standard. A system of capital controls was introduced to protect countries from the damaging effects of capital flight and to allow countries to pursue independent macroeconomic policies while still welcoming flows intended for productive investment.
The system remained in place from 1945 to 1971 when the central role of the US Dollar became a problem as the international demand for dollars eventually forced the US to run a persistent trade deficit, which undermined confidence in the dollar. This, together with the emergence of a parallel market for gold where the price soared above the official US mandated price, led to speculators running down the US gold reserves. Even when convertibility was restricted to nations only, some (notably France) continued building up hoards of gold at the expense of the US. Eventually these pressures caused President Nixon to end all convertibility into gold on 15 August 1971. This event marked the effective end of the Bretton Woods systems; attempts were made to find other mechanisms to preserve the fixed exchange rates over the next few years, but they were not successful, resulting in a system of floating exchange rates which we (generally) have today.
