All the bretton woods countries have agreed to a firm peg to the US dollar, with diversions of only 1% allowed. Countries were required to monitor and maintain their currency anchors, which they achieved primarily by using their currency to buy or sell U.S. dollars as needed. The Bretton Woods system has thus minimized the volatility of international exchange rates, which has supported international trade relations. Greater stability in foreign exchange operations has also been a success factor in supporting World Bank loans and grants at the international level. In March 2010, Greek Prime Minister Papandreou wrote a comment in the International Herald Tribune in which he said: “Democratic governments around the world must establish a bold new global financial architecture in its own way, like Bretton Woods. as bold as the creation of the European Community and the European Monetary Union. And we need it quickly. In interviews that coincided with his meeting with President Obama, he indicated that Obama would raise the issue of new regulations for international financial markets at the upcoming G20 meetings in June and November 2010. Several authors have extended the first and second generation models to account for the specificities of the Asian crisis, including moral hazard (guarantees), short-term foreign currency borrowing, and currency depreciation. Krugman (1998) argued that the monetary and financial crisis in Asia reflected the role of moral hazard as a precursor to financial instability, which in turn was one of the main causes of currency crises. According to its history, financial institutions in these countries made risky loans assuming they would be saved, while financing themselves with offshore loans close to international interest rates. Capital inflows and loans to domestic banks fueled a boom in asset markets, which encouraged banks to lend more.

This process has fostered a boom in domestic investment and consumption and a growing current account deficit. When external factors showed that the exchange rate was overvalued, a classic speculative attack led to a devaluation. The devaluation, in turn, triggered a financial crisis when banks` short-term foreign currency loans sprang up like mushrooms, making them both illiquid and insolvent. Bailouts of the financial system, and in particular their dollar liabilities, have triggered further speculative attacks and depleted the international reserves of the monetary authorities. But what I mean is precisely that there is room for disagreement on how monetary policy should respond to a severe credit crunch. Conflicts may not remain below the surface as the credit crunch drags on. They can occur not only between monetary authorities and different national constituencies, but also between countries. Imagine, for example, what protectionist pressures in Europe would look like if the US pursued a higher inflation strategy that would devalue the dollar (although the devaluation of the dollar is not the main objective of US monetary policy). In turn, the role of government in the national economy was associated with the assumption by the state of the responsibility for ensuring a certain level of economic well-being for its citizens.

The system of economic protection of vulnerable citizens, sometimes referred to as the welfare state, was born out of the Great Depression, which created a popular demand for state intervention in the economy, and theoretical contributions from the Keynesian school of economics, which affirmed the need for state intervention to counter market imperfections. Economists and other planners realized in 1944 that the new system could only begin after a return to normal after the interruption of World War II. It was expected that after a short transition period of up to five years, the international economy would recover and the system would go live. The main features of the Bretton Woods system were the obligation for each country to conduct a monetary policy that kept the exchange rate of its currency at a fixed value – more or less one per cent – against gold; and the IMF`s ability to address temporary payment imbalances. .