What were the major weaknesses of Bretton Woods System which led to its breakdown in 1971?  

The Bretton Woods System, established in 1944 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, was a post-World War II international monetary system. It was designed to create a stable global economic environment by fixing exchange rates and providing a framework for international trade and finance. However, despite its initial success, the system faced several major weaknesses that eventually led to its breakdown in 1971. Let's examine these weaknesses in detail:

1. Fixed Exchange Rates: The Bretton Woods System relied on fixed exchange rates, with currencies pegged to the U.S. dollar, which, in turn, was tied to the price of gold. This fixed exchange rate regime could not accommodate fluctuations in national economies, leading to misalignments between currencies and their real values. As countries faced different economic conditions, the fixed rates became increasingly unsustainable.

2. Dollar's Overvaluation: The U.S. dollar, being the central reserve currency, became overvalued in the international markets. The demand for the dollar increased as it was the primary currency used for conducting trade and holding reserves. As a result, the U.S. experienced persistent trade deficits, as other countries accumulated dollars and the U.S. dollar's value rose relative to other currencies.

3. Trade Imbalances: The Bretton Woods System lacked a mechanism to address trade imbalances effectively. Some countries consistently ran trade surpluses, while others ran deficits. The system did not provide an automatic adjustment process to correct these imbalances, leading _____ _______ __________ __________ ________ ___ ________.
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