Bretton Woods II?
- Thread starter Plumber
- Start date
Sadly as Color Copycat says, unless you have a good grasp of economics it's very difficult to speak authoritatively on the issues involved as they're so complex.
As for my own two cents as to why a successor system wasn't introduced, I guess it was because there was a move away from fixed exchange rates towards floating curencies. Also the cost of under pinning the system proved increasingly difficult for the U.S. and they probably had no interest in creating a succesor system.
As for my own two cents as to why a successor system wasn't introduced, I guess it was because there was a move away from fixed exchange rates towards floating curencies. Also the cost of under pinning the system proved increasingly difficult for the U.S. and they probably had no interest in creating a succesor system.
This is pretty much spot on. Bretton Woods was pretty much doomed the minute it was decided to use a Gold to Dollar standard rather than using a neutral currency. As for a followup to Bretton Woods I just can't see it ever getting the necessary political support for a variety of reasons to ever really get off the ground.
Nixon dumped it because the US would have run out of gold had it continued and for inflationary reasons.
Even if you have a good grasp of economics, it's a bloody difficult issue. Although a very intriguing one, for various reasons. I don't think the board has any economic professors (alas, because I'm not one either and would love more informed discussion) and the level of economic literacy among any population is essentially zero.
(Hence the odd pop-up of people who support WWII for getting the USA out of the Great Depression but don't understand that WWII was just the same as if that amount of money had been spent on the New Deal.)
Yeah basically.
IIRC (it's been a while since I looked at Bretton Woods) there were a number of proposals on a floating bracket system using the USD as the pegging standard, but nothing got off the ground.
It could be a good thing (IMO) because floating currencies on perceived economic performance is a nightmare open to abuse. As has already happened a number of times (heck the UK nearly went under on the issue) but since you can make way too much money on it there has never been any move to regulate the currency speculation and carry trade game.
Even if you have a good grasp of economics, it's a bloody difficult issue. Although a very intriguing one, for various reasons. I don't think the board has any economic professors (alas, because I'm not one either and would love more informed discussion) and the level of economic literacy among any population is essentially zero.
(Hence the odd pop-up of people who support WWII for getting the USA out of the Great Depression but don't understand that WWII was just the same as if that amount of money had been spent on the New Deal.)
Yeah basically.
IIRC (it's been a while since I looked at Bretton Woods) there were a number of proposals on a floating bracket system using the USD as the pegging standard, but nothing got off the ground.
It could be a good thing (IMO) because floating currencies on perceived economic performance is a nightmare open to abuse. As has already happened a number of times (heck the UK nearly went under on the issue) but since you can make way too much money on it there has never been any move to regulate the currency speculation and carry trade game.
Part of the problem with Bretton Woods was the ability to create a crisis if the values of the currency really were out of whack. A bigger problem, though, was that as a rule nobody wants to devalue their currency, no matter what the consequences. Even though a strong currency can wreak havoc on a domestic economy, very few countries will do so outside of a crisis (i.e. the UK's eventual devaluation in the 1960s). There's one exception to this (highly export-dependent countries), but then they don't want their currency to appreciate when it "needs" to for the system to remain in balance.
Bretton Woods collapsed, in essence, because the pegged values fell out of date but nobody was willing to make the changes needed to get those values back to where they needed to be to stabilize trade balances.
Edit: Per the above post...yes, I'm a mild econ geek. Some of the formulas are slightly beyond me (I hate calculus), but I'm familiar with at least some of the realities.
Bretton Woods collapsed, in essence, because the pegged values fell out of date but nobody was willing to make the changes needed to get those values back to where they needed to be to stabilize trade balances.
Edit: Per the above post...yes, I'm a mild econ geek. Some of the formulas are slightly beyond me (I hate calculus), but I'm familiar with at least some of the realities.
My two cents
Bretton Woods was an attempt to make a postwar economic recovery happen by pegging gold and everything else to rather static dollar value b/c at the time the US could dictate it, and everyone else involved figured it was better than nothing.
As others have noted , this became actively unworkable as "real" values of goods and services denominated by various currencies drifted further and further away from the pegged values Bretton Woods set, especially as inflation took hold after the 1973 oil shocks.
By that time, IMO herding the various economic powers together for a G-7 meeting to fix prices at a level was next to impossible due to too many new players, too many agendas, nobody to push consensus in a useful direction.
Bretton Woods was an attempt to make a postwar economic recovery happen by pegging gold and everything else to rather static dollar value b/c at the time the US could dictate it, and everyone else involved figured it was better than nothing.
As others have noted , this became actively unworkable as "real" values of goods and services denominated by various currencies drifted further and further away from the pegged values Bretton Woods set, especially as inflation took hold after the 1973 oil shocks.
By that time, IMO herding the various economic powers together for a G-7 meeting to fix prices at a level was next to impossible due to too many new players, too many agendas, nobody to push consensus in a useful direction.
If the Vietnam war (and ensuing deficits) had been averted, would the decline of the US dollar as a reserve currency and ersatz gold standard have been gradual enough for the pact to be renegotiated?
Granted, the US trade surplus would continue narrowing, but at least other industrial economies would have more time to adapt.
Granted, the US trade surplus would continue narrowing, but at least other industrial economies would have more time to adapt.
Certainly without Vietnam Bretton Woods could have lasted a few more years before America's deficit reached levels that would have caused the system to break up anyway. The oil shock would probably have done it, avoiding Vietnam still leaves the Arab Israeli dispute.
If we're looking have a Bretton Woods II then we need some of 1960s agreement before the USA unilaterally kills it.
That would have to involve the USA, Japan, the UK, West Germany, and France with most Western countries roped in by default.
Although the USD is the obvious peg a reserve currency basket (say the USD, Pound, Yen, Franc, and Mark) might work better. The basket is adjusted in relation to internal currencies yearly, and outside currencies are pegged to it. Shrug, I dunno. Currency floating versus fixed is a devilish issue.
That's always been one of the weirder parts of currency to me. Japan, obviously, does its level best to keep the yen low for export reasons but the USA would be better off with a lower valued USD right now if they want to try and spark some kind of export boom.
Same as me, basically. Which is why I'd love if the board had a couple proper economists.
That would have to involve the USA, Japan, the UK, West Germany, and France with most Western countries roped in by default.
Although the USD is the obvious peg a reserve currency basket (say the USD, Pound, Yen, Franc, and Mark) might work better. The basket is adjusted in relation to internal currencies yearly, and outside currencies are pegged to it. Shrug, I dunno. Currency floating versus fixed is a devilish issue.
That's always been one of the weirder parts of currency to me. Japan, obviously, does its level best to keep the yen low for export reasons but the USA would be better off with a lower valued USD right now if they want to try and spark some kind of export boom.
Same as me, basically. Which is why I'd love if the board had a couple proper economists.