The Bretton Woods Agreement was created in 1944 at a conference of all allied nations of World War II. It took place in Bretton Woods, New Hampshire. The Bretton Woods planners established a system of rules, institutions and procedures to regulate the international monetary system and created the International Bank for Reconstruction and Development (IBRD) (now one of the five institutions of the World Bank Group) and the International Monetary Fund (IMF). These organizations began their work in 1946, after a sufficient number of countries had ratified the agreement. The intention of the SDR was to prevent nations from buying committed dollars and selling them at the higher free market price, and to give nations a reason to hold dollars by crediting interest while setting a clear limit on the amount of dollars that could be held. The main conflict was that the role of the United States as the military defender of the world capitalist system was recognized, but not endowed with any monetary value. In fact, other nations have „bought“ US defense policy by making a loss by holding dollars. They were willing to do so as long as they supported U.S. military policy, because of the Vietnam War and other unpopular, pro-American actions.

The consensus began to evaporate. The SDR agreement did indeed monetized the value of this relationship, but did not create a market for it. The agreement could not promote discipline from the Federal Reserve or the U.S. government. The Federal Reserve was worried about a rise in the domestic unemployment rate due to the depreciation of the dollar. In an attempt to undermine the efforts of the Smithsonian agreement, the Federal Reserve lowered interest rates in order to pursue a predefined domestic policy goal of full domestic employment. With Smithsonian`s agreement, member countries expected dollars to return to the United States, but lower interest rates inside the United States led dollars to continue flowing from the United States to foreign central banks. The entry of dollars into foreign banks continued the process of monetizing the dollar abroad and thwarted the goals of the Smithsonian agreement. As a result, the price of the dollar on the free gold market continued to put pressure 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 freely.

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