The Bretton Woods economic conference would make a great movie: Dashing celebrity economist John Maynard Keynes of the U.K. squared off against U.S. Treasury official Harry Dexter White, who was later revealed to be a Soviet spy.
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
When the world economy heads into crisis, the international currency system often breaks down. This occurs either because debtors can’t meet their obligations, or because creditors fear they are not being repaid in sound money. The first condition exists today in the euro zone; the second is likely to emerge in the China-U.S. relationship.
On March 4, 1933, Franklin D. Roosevelt became president for the first time, promising an “adequate but sound” currency. The next day, a Sunday, he closed the nation’s banks. “We are now off the gold standard,” he privately declared to a group of advisers. Goldbugs in the president’s circle immediately began prophesying doom. One of his aides, Lewis Douglas, proclaimed “the end of Western civilization.”
Following is a timeline of the key steps on the road to the euro currency, from the Bretton Woods conference in 1944 to last week’s agreement to set up a “fiscal compact” among countries using the single currency.
The global monetary and financial system hasn’t maintained financial stability as well as the Bretton Woods system of fixed currencies and needs to be reformed, according to a Bank of England research paper.
Both the international monetary system and American fiscal policy began to change in the 1960s. The system developed at the United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire, in July 1944, fixed exchange rates to a dollar backed by gold. It worked successfully for years. But it couldn’t last forever.