FACTBOX: The financial system established at Bretton Woods
(Reuters) - Members of the G20 grouping of nations were set to arrive on Friday in Washington to discuss ways to reform the global financial system.
Here are some details about the financial architecture established in 1944 by the Bretton Woods Conference, which European and other leaders now say needs updating:
* THE CONFERENCE - WHAT DID IT DO?
-- With World War Two drawing to a close and Japan and Europe in ruins, the world's economic elite gathered to build a framework for economic cooperation that would avoid a repetition of the cycle of competitive devaluations that had contributed to the Great Depression of the 1930s.
-- The Conference established the International Monetary Fund and the World Bank, set the gold standard at $35 an ounce and chose the dollar as the cornerstone of world currency exchange.
* SINCE THEN:
-- Bretton Woods was blown apart by the strains produced by the war in Vietnam and effectively suspended by President Richard Nixon in 1971. This meant the U.S. would no longer honor the agreement which made the U.S. dollar the world's reserve currency, and allowed other countries to convert their US-dollar holdings into gold.
-- In 1994, calls for more stability resurfaced after the dollar tumbled to a series of post-World War Two lows against the Japanese yen and central bankers and politicians worried about the onslaught of speculators in foreign exchange markets.
* 2008:
-- The global credit crunch that originated in the U.S. housing market 15 months ago before enveloping the banking system and threatening the very foundations of the global market economy, has prompted banks to pull back lending to each other and to businesses and households.
-- Synchronized rate cuts by central banks and emergency government packages worth some $4 trillion may have prevented a banking sector meltdown, but the world economy is in poor shape.
-- British Prime Minister Gordon Brown and French President Nicolas Sarkozy want a "Bretton Woods"-style reworking of supervision of global capital markets.
Sources: Reuters; IMF; World Bank; www.brettonwoodsproject.org / britannica.com/
