Chokepoints: American Power in the Age of Economic Warfare

by Edward Fishman

At the heart of Bretton Woods were fixed exchange rates: the dollar was pegged to gold at $35 an ounce, and all other currencies were pegged to the dollar. These exchange rates were adjustable only within a narrow band; anything beyond a 1 percent move required consultations with the newly created International Monetary Fund (IMF). Bretton Woods also included restrictions on the movement of money across borders, walling off a key route through which financial instability had spread during the Great Depression. The dollar was now at the center of the world economy. But by fixing exchange rates and limiting cross-border capital flows, the Allies created a heavily constrained international financial system—which is exactly what John Maynard Keynes, the renowned British economist and a principal architect of Bretton Woods, thought was necessary.