The Bretton Woods System of money management has its roots originate from the 20th century. This system regulated the commercial and financial systems in the global trading system after chaotic declines in the trade and monetary order of nations after World War II, the Great Depression etcetera. The interwar periods and the contributory monetary disorder is one of the major reasons for the formation of this system.

There was a strong intensity of agreement in the ambitions of the powerful nations to regularize financial strength by organizing the monetary proceeds through the globe. This resulted in the Bretton Woods Conference. The participants in this conference were strong believers in capitalism. There was a slight difference in the choice of the agreeability and desire to favor capitalism. Some of the, then developed countries preferred to have capitalism intervened by their operating states, while some countries did not require complete planning and intervention by the state and they wanted the state influence to be minimal in the capitalization process, regardless of the aim of such being national economic development.

The scope of the Bretton Woods System of money management was to regulate the flow of money by regulating it with respect to the domestic orientation of the financial processes, by bringing it under an arrangement focusing on exchange markets with respect to the gold or pegged currency.

The members of the Bretton Woods System formed:

• The International Bank For Reconstruction and Development
• The International Monetary Fund.

These 2 organizations became operational in 1945 many countries established their agreeability with the system.
Formation of these two financial institutions was accomplished after initiating a set of rules and procedures to manage the money flow process.

The salient features of the Bretton Woods system were as follows:

• Every country should have its own monetary policy.
• The monetary policy of the country should focus to stabilize, improve, and maintain the exchange rate of its currency.
• The Fixed exchange rate of the country should be maintained at plus or minus 1% of the gold, which means the money of the country was based on gold.

In 1971, when the financial system of the United States met with a strain, the US stopped the convertibility of the dollars in to Gold, this led to a drastic stress in the global economy; the countries, which had US dollars for trade had to keep it as a reserve currency for trade.
Free trade was dependent entirely on the free convertibility of the currencies between countries in trade.

The delegate members at the Bretton Woods conference were able to look through the stoppage in the free flow of trade if there were huge monetary fluctuations in the floating exchange rates for the currencies.

There was a need for an acceptable vehicle for investment, payments and trade, per the liberal economic system. It is well known that there is no international central bank like there are central banks for each nation; though this lack of central bank was balanced by the gold standard method.

The Bretton Woods recognized the gold standard as impractical in post war conditions. This led to the establishment of the fixed exchange rate systems, which were overlooked and regulated by international institutions. This regulation was put in to force by having the US currency as the reserve currency for the regulation process.