Bretton Woods Conference
The Bretton Woods Conference established in 1944 the gold standard upon which the leading economic nations, and particularly the United States, would base their financial relations and monetary systems. 44 Allied nations sent delegates to the Mount Washington Hotel in Bretton Woods, New Hampshire, under the auspices of the United Nations, to discuss and sign the Bretton Woods Agreements in July 1944. These agreements established the International Monetary Fund (IMF), which still exists, and the International Bank for Reconstruction and Development (IBRD), which is now part of the World Bank Group.
The essential agreement was to establish a gold standard for the world's leading currencies. Each industrialized nation would adopt a monetary policy to maintain the exchange rate of its currency within a fixed value relative to gold, plus or minus one percent. The role of the IMF was to handle temporary imbalances of payments between nations.
Bretton Woods System
You can't stop trade between people. Without trade, people starve. So aggregate exchange rates have to be established between local communities for cross border transactions. These exchange rates for cross border transactions are handled between bankers. The Bretton Woods conference established between bankers who pays who for what. More precisely what institution would accept payment from, or make payment to which institution on an approved list to count their total assets as a qualified borrower or lender. This is called the Bretton Woods System. Some of these institutions didn't exist before the conference, and were created out of the conference with aggregate assets of lenders participating in the conference to provide working capital. The institutions are the World Bank, the International Monetary Fund to reconcile accounts annually between member states. And the Bank for International Settlements to settle mostly civil claims between actors.
Petrodollar
In August 1971, President Richard Nixon ended the convertibility of U.S. dollars into gold, in the face of mounting inflation and debts caused in part by out-of-control government spending and in part by the Vietnam war. This caused a run on U.S. gold reserves and the value of the dollar to free fall. In June 1974, Nixon addressed this issue by signing a series of bilateral agreements with Saudi Arabia, in which the latter country would use its political influence to coerce OPEC into standardizing the sale of oil in dollars, therefore preserving the dollar's status as the global reserve currency in the post-Bretton Woods era.[1]
The U.S. sold dollars needed for international transactions by issuing Treasury debt, which is a universally fungible international medium of exchange. Virtually all transactions for oil globally had been conducted in dollars until late 2022 when Saudi Arabia began accepting Chinese yuan. This gave the U.S. an “exorbitant privilege” in that it could issue an unlimited stream of Treasury debt to the world. One of the consequences of this arrangement is that it has allowed the U.S. to spend far beyond its means, running up $32 trillion of debt since 1980, when its national debt stood at a mere $1 trillion.
When the Federal Reserve raised interest rates to take care of U.S. needs, it made capital flow out of other countries, and the value of their currencies fall, forcing inflation on them. Not a single country in the world was left untouched. Many countries did not want be held hostage to the implicit and explicit negative consequences of dollar hegemony, and wanted to remove the “exorbitant privilege” that they believed the U.S. abused to their individual and collective detriment.
The BRICS group, led by Russia and China began building an international finance and trading system that does not rely on dollars, that uses countries’ local currencies, gold, oil, or other assets to trade. The U.S. abuse of economic sanctions to blackmail and punish other countries that did not bend to America's will added to the impetus.
