The Gold Standard and Bretton Woods Before understanding Bretton Woods, it is important to know about the gold standard. The gold standard was a monetary system where a country's currency had a fixed value linked to gold. After World War II, delegates from 44 Allied Nations met at the Bretton Woods conference in New Hampshire to establish an international economic order. This resulted in the creation of two institutions: IMF and IBRD.
'Nixon Shock' and Collapse of Bretton Woods "Nixon Shock" refers to President Nixon's decision in 1971 to suspend convertibility of US dollars into gold due to concerns over inadequate reserves. In response, other countries devalued their currencies relative to the dollar under the Smithsonian agreement but speculators caused its collapse by driving down the dollar further. As a result, major countries abandoned pegging their currencies against USD leading to floating exchange rates.