The United States was a founding member of the International Monetary Fund (IMF), having hosted the other countries at the IMF’s founding conference, the Bretton Woods Conference, in 1944. The US delegation played an integral role in the establishment of the basic tenets of the IMF and maintains a large presence in the workings of the organization.
In addition, under the Bretton Woods system, other countries’ currencies were kept at a fixed exchange rate to the U.S. dollar, which in turn was pegged to the value of gold.
Later in the 20th century, the U.S. began to accumulate balance-of-payment debt and its gold reserve (once 60% of all gold) began to shrink. As a result, in 1971, the U.S. ended the fixed exchange rate between dollars and gold in the Nixon shock.
The US continues to be the largest financial contributor to the IMF. As such, it has the most voting power (at 17%) and can effectively veto any motion. It also has close relations with IMF leadership.
History
Initial plans
The concept and initial plans for the IMF originated in the United States. Shortly after World War II, delegates from 44 countries convened in the Mount Washington Hotel in Bretton Woods, New Hampshire, U.S., for the Bretton Woods Conference in 1944. The objective of the conference was to design a system to rebuild Europe; after World War II, Europe had become economically unstable and required financial assistance. The result was that the U.S. became a founding member of the IMF. American influence was strong from the beginning; at its inception and during its early years, the IMF was founded in large part on core principles presented by American Chief International Economist of the U.S. Treasury Department Harry Dexter White.
White, confirmed by the Senate in 1946 as the US Executive Director of the Fund, played an integral role in the formation of the IMF alongside John Maynard Keynes at the Conference. He authored the White Plan, the initial proposal for the IMF in conjunction with the United Kingdom's Keynes plan, and made substantial contributions to the Joint Statement by Experts on the Establishment of an International Monetary Fund. The Joint Statement would eventually become the Articles of Agreement of the IMF, which outline its structure, its key functions, and the duties of its member countries. Under White's leadership, the American delegation to the Bretton-Woods Conference cemented the US's role in charting the future of the IMF. For instance, it played a substantial role in the establishment of quotas for each country, with Fred M. Vinson, the Vice-Chairman of the US delegation, heading the ad-hoc committee in charge of this task.
The IMF was formally established through the Bretton Woods Agreement and System; this created the first international currency exchange system that would last until the 1970s. According to this system, the U.S. dollar would become the central global currency. One ounce of gold was to be worth 35 U.S. dollars and the U.S. promised to sell at this price. Meanwhile, all other countries would have to maintain their current exchange rate to the U.S. dollar.
20th century
The Bretton Woods System was founded on the principle that the U.S. was a steady and reliable global economy; the U.S. had over 60% of the world's total gold in its reserve. However, starting in the 1950s, the U.S. began to accrue consistent balance-of-payment debt. From 1950 to 1957, U.S. BOP debt was estimated to be around 1.3 billion dollars annually. At the same time, the U.S. gold reserve started to leak: from 1950 to 1957 the U.S. lost an estimated 213 million dollars worth of gold annually. This debt continued to increase, reaching 3.7 billion dollars in BOP debt and 1.4 billion dollars of gold each year from 1958 to 1962. In addition to debt and a shrinking gold reserve, the U.S. dollar experienced accelerated inflation after 1965. Prior to 1965, inflation was at less than 2 percent per year. After 1965, this figure tripled to around 6 percent. Ultimately, the U.S. ended the fixed exchange rate between the U.S. dollar and an ounce of gold that was originally agreed upon in what is now known as the Nixon shock.