Out of the “currency wars” of the 1930s, and then World War II, came a shared dream among the non-communist states: to establish a stable economic environment for business and trade. Representatives from forty-four countries met at the Mount Washington Hotel in Bretton Woods, New Hampshire, and recreated the world gold standard system.
The U.S. dollar was officially linked to gold at $35/ounce, its gold parity since 1934. Other currencies were linked to the dollar at fixed exchange rates, which effectively meant that they were linked to gold as well. The Japanese yen was 360/dollar, year after year. (360*35=12,600/oz.) The German mark was 4.20/dollar.
In June of this year, former Federal Reserve chairman Paul Volcker spoke at the annual meeting of the Bretton Woods Committee, and pined for the world in which he grew up and began his career.
Volcker was under-secretary of the Treasury for international monetary affairs from 1969 to 1974. The U.S. ended the Bretton Woods’ system’s official link to gold in 1971, and the system’s final dissolution was in the spring of 1973.