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?
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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.