Bretton Woods Inertia and the Coming End of an Era
Stuart Staines submits:
To understand the seismic change I believe is ahead of us, we must go back in history where a single event sheds much light on the cornerstone of the prosperous six decades we have enjoyed and the trade imbalances this has fostered. As we all know, at the end of World War II, the European continent was in total ruins. The US, on the other side, emerged with an industrial might significantly larger than before the war started.
The balance of power had reached extremes and with it, an historical opportunity for the US. In July 1944, 730 representatives from 44 different countries met in a small village in New Hampshire and agreed to a system of exchangeable currencies and open rules of trade. The general objective was to avoid another depression that appeared to have been caused by flexible exchange rates that limited trade and investment whilst fueling speculation and competitive depreciations. For a desperate Europe, the choice was basically between accepting Soviet occupation (unlikely to withdraw after the war) or accepting U.S protectorate.
