**Article:**
Between 1971 and 1973, the international monetary system underwent a major transformation with the end of the Bretton Woods agreement. Established in 1944, Bretton Woods had fixed currencies to the US dollar, which was convertible to gold. However, growing economic pressures and imbalances led the United States to suspend the dollar’s convertibility into gold in 1971, effectively ending the system.
Following this shift, many countries moved away from fixed exchange rates and adopted floating currencies, allowing their values to fluctuate according to market forces. This transition marked a significant change in global finance, as exchange rates became more flexible and responsive to economic conditions. The period set the foundation for the modern system of currency trading and international finance.
**Why this matters**
The end of Bretton Woods and the rise of floating exchange rates reshaped global economic relationships and monetary policy. It introduced greater volatility in currency markets but also provided countries with more autonomy to respond to economic challenges. Understanding this shift helps explain the current dynamics of international trade and finance.
Source: NewsData