The 1944 Bretton Woods Agreement established a new global monetary system. It replaced the Pound Sterling as the International Reserve Currency with the U.S. dollar, and it still maintained the Gold Standard.

Before and after the Bretton Woods Agreement, most countries followed the gold standard, which meant each country guaranteed that it would redeem currency for its value in gold.

The reason given for the U.S. dollar becoming the international reserve currency was the U.S. held three-fourths of the world’s gold supply, and no other global currency had enough gold to back it as a replacement. The U.S. dollar’s value was stated to be 1/35th of an ounce of gold. Bretton Woods allowed the world to slowly transition from the Pound Sterling to a U.S. dollar standard without anyone really understanding the significance of what was taking place. Keep on reading!