Toward Bretton Woods 2.0?
In 1971, President Richard Nixon closed the gold window, effectively ushering in a new global monetary non-system with a single pillar: the US dollar. Fifty years later, that pillar is showing signs of strain. Can the world muster the cooperation needed to manage whatever comes next?
Listen and subscribe to all episodes from your favorite podcast app. Find Opinion Has It on Apple Podcasts, Google Podcasts, Acast, or via RSS Feed. Have a suggestion for an episode? Email us at podcasts@project-syndicate.org.
Transcript
Elmira Bayrasli: Welcome to Opinion Has It. I’m Elmira Bayrasli.
It was the summer of 1944. World War II was raging, and the global economy was in tatters. A peaceful and prosperous future characterized by global cooperation probably seemed like wishful thinking. And yet, at a secluded hotel in Bretton Woods, New Hampshire, delegates from around the world laid the groundwork for just that.
Archive Recording: At Bretton Woods, New Hampshire, delegates from 44 Allied and associate countries arrived for the opening of the United Nations Monetary and Financial Conference.
EB: The Bretton Woods conference gave rise to the International Monetary Fund and the International Bank for Reconstruction and Development, which would later become the World Bank.
Archive Recording: These meetings are designed to promote trade in the post-war world, and to create a foundation for lasting peace.
EB: It also established a fixed-exchange-rate system. All national currencies were valued in relation to the US dollar, which was convertible to gold at a fixed rate.
Archive Recording: When you think of a global currency, what is it that comes to your mind? Is it the US dollar because it accounts for almost 90% of the forex, about 62% of foreign reserves? It is called the petrodollar.
EB: But while Bretton Woods institutions went on to become pillars of the international order, the Bretton Woods exchange-rate system lasted only until 1971.
Archive Recording, US President Richard Nixon: I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets.