When the stock market crashed in October 1929, countless investors lost their fortunes. Banks also lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures.
With the Crash and ensuing depression, public confidence in the markets plummeted. There was a consensus that for the economy to recover, the public’s faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions.
Based on the findings in these hearings, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws were designed to restore investor confidence in capital markets by providing more structure and government oversight. The main purposes of these laws can be reduced to two commonsense notions:
With the Crash and ensuing depression, public confidence in the markets plummeted. There was a consensus that for the economy to recover, the public’s faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions.
Based on the findings in these hearings, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws were designed to restore investor confidence in capital markets by providing more structure and government oversight. The main purposes of these laws can be reduced to two commonsense notions:
- Companies that publicly offer securities for investment dollars must tell the public the truth about their businesses, the securities they are selling, and the risks involved in investing.
- People who sell and trade securities—brokers, dealers, and exchanges must treat investors fairly and honestly, putting investors’ interests first.
The Bretton Woods System, 1944–1973
The post–World War II period saw Great Britain’s economy in ruins, its infrastructure having been bombed. The country’s confidence with its currency was at a low. By contrast, the United States, thanks to its physical isolation, was left relatively unscathed by the war. Its industrial might was ready to be turned to civilian purposes. This then has led to the dollar’s rise to prominence, becoming the reserve currency of choice and staple to the international financial markets.
Bretton Woods came about in July 1944 when 45 countries attended, at the behest of the United States, a conference to formulate a new international postwar period and prevent the recurrence of the 1930s global depression.financial framework. This framework was designed to ensure prosperity in the Named after a resort hotel in New Hampshire, the Bretton Woods system formalized the role of the U.S. dollar as the new global reserve currency, with its value fixed into gold. The United States assumed the responsibility of ensuring convertibility while other currencies were pegged to the dollar. Among the key features of the new framework were:
The post–World War II period saw Great Britain’s economy in ruins, its infrastructure having been bombed. The country’s confidence with its currency was at a low. By contrast, the United States, thanks to its physical isolation, was left relatively unscathed by the war. Its industrial might was ready to be turned to civilian purposes. This then has led to the dollar’s rise to prominence, becoming the reserve currency of choice and staple to the international financial markets.
Bretton Woods came about in July 1944 when 45 countries attended, at the behest of the United States, a conference to formulate a new international postwar period and prevent the recurrence of the 1930s global depression.financial framework. This framework was designed to ensure prosperity in the Named after a resort hotel in New Hampshire, the Bretton Woods system formalized the role of the U.S. dollar as the new global reserve currency, with its value fixed into gold. The United States assumed the responsibility of ensuring convertibility while other currencies were pegged to the dollar. Among the key features of the new framework were:
- Fixed but adjustable exchange rates.
- The International Monetary Fund.
- The World Bank.
