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trouble between the world wars, it was felt, has been greatly affected by any given process or governmental consultation mechanism between the cases, increased. In the post-war era, the fund itself will provide such a forum - in fact, a truly historic achievement. No more break the path of a country's decision to allocate voting rights among the government, one vote basis, but a considerable proportion of the quota. One third of all the IMF quota, first of all, the United States is in itself a guarantee of future decision-making and effective veto power.

With these four points, we can conclude that the definition of the Bretton Woods system is a monetary standard is the combination of an unchanged gold exchange, a centralized pool of gold and national currencies, and an exchange rate system of adjustable pegs. IMF was the center of the regime and it had to carry out three essentual functions as stated as below:

Regulatory - administer the rules governing currency values and convertibility,

Financial - supply supplementary liquidity

Consultative - provide a forum for cooperation among governments.

Under the Bretton Woods system, central banks of countries other than the United States had to perform the task of maintaining fixed exchange rates between their currencies and the dollar by intervening in foreign exchange markets. If a country's currency was too high relative to the dollar, its central bank would sell its currency in exchange for dollars in order to reduce the value of its currency. Conversely, if the value of a country's money was too low, the country would buy its own currency in order to raise the price.

The Bretton Woods system had been lasted until 1971. The inflation in the United States and a growing American trade deficit of that time were depreciating the value of the dollar. Americans urged both Germany and Japan which had favorable payments balances to appreciate their currencies. But those nations were reluctant to do so, since raising the value of their currencies would raise the prices for their goods and hurt their exports. Finally, the United States abandoned the fixed value of the dollar and allowed it to 'float', that is to fluctuate against other currencies. This caused the dollar fell dramatically. World leaders sought to revive the Bretton Woods system with the so-called Smithsonian Agreement in 1971, but failed. By 1973, the United States and other nations agreed to allow exchange rates to float.

Economists named the resulting system as 'managed float regime', which means that even though exchange rates for most currencies float, central banks still can intervene to prevent sharp changes. As in 1971, countries with large trade surpluses often sell their own currencies in an effort to prevent them from appreciating and prevent them from hurting exports. Conversely, countries with large trade deficits often buy their own currencies in order to prevent depreciation, which could increase domestic prices. But there are limits to what can be accomplished through intervention, especially for countries with large trade deficits. Eventually, a country that intervenes to support its currency may deplete its international reserves, making it unable to continue buttressing the currency and potentially leaving it unable to meet its international obligations.

2.5.2 Advantage and Disadvantage of Brett