The agreement did not promote the discipline of the Federal Reserve or the U.S. government. The U.S. Federal Reserve expressed concern about a rise in the domestic unemployment rate due to the depreciation of the dollar. To undermine the efforts of the Smithsonian Agreement, the Federal Reserve lowered interest rates in order to pursue a pre-domestic policy objective of full national employment. With the Smithsonian agreement, member states expected the dollar to return to the United States, but lower interest rates within the United States have led the U.S. dollar to continue to flow to foreign central banks. The influx of dollars into foreign banks continued the process of monetizing the dollar abroad, beating the objectives of the Smithsonian agreement. As a result, the price of the dollar in the goldless market continued to weigh on its official price; Shortly after the announcement of a 10% devaluation in February 1973, Japan and the EEC countries decided to let their currencies fluctuate. This turned out to be the beginning of the collapse of the Bretton Woods system.

The end of Bretton Woods was officially ratified by the Jamaican Agreements in 1976. In the early 1980s, all industrialized countries used floating currencies. [44] [45] The Bretton Woods Agreement was established in 1944 at a conference of all allied nations of the Second World War. It took place in Bretton Woods, New Hampshire. The Bretton Woods countries have decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a solid pool of national currencies and gold, which would be held by the IMF. Each member country of the Bretton Woods system then had the right to borrow as part of its dues, which it needed. The IMF was also responsible for implementing the Bretton Woods agreement. As part of the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. If a country`s monetary value became too low against the dollar, the bank would buy its currency back on the foreign exchange markets. IBRD) is intended for a fixed exchange rate system. The rules also aimed to promote an open system by requiring members to convert their respective currencies into other currencies and to make free trade.

Despite its name, the World Bank has not been (and is) not the central bank of the world. At the time of the Bretton Woods agreement, the World Bank was created to lend to European countries devastated by the Second World War. The World Bank`s focus has changed in lending to economic development projects in emerging countries. The IMF has attempted to provide for occasional adjustments to discontinuous exchange rates (changes in a member`s face value) by an international agreement. Member States have been allowed to adjust their exchange rates by 1%. This trend has been to restore the balance of trade by increasing exports and reducing imports. This would only be permissible if there was a fundamental imbalance. A depreciation of a country`s money was described as a devaluation, while an increase in the value of the country`s money was described as an appreciation.