First the gold standard, then Bretton Woods, then floating exchange rates, and now what?



Bretton Woods
Originally uploaded by robinpresta

Edmund Conway (who is always worth reading) has written a very insightful article about the shift in international monetary structures.

He points out that the current system (floating exchange rates) has become unstable because “many developing nations (typified by China) have chosen instead to fix their currencies (in an effort to protect their exports)”, which means that “the world’s monetary system is being run in two incompatible ways”. (He doesn’t mention the euro in that context, but I presume it must be another factor in the break-down of the floating exchange rate system.)

Although he lists two possible outcomes, he seems to think that the problems won’t completely go away until China overtakes the US as the main economic power of the World.

It’s definitely worth reading the whole thing!

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