In 1971, President Richard Nixon closed the window on gold, effectively ushering in a new global monetary non-system with a single pillar: the US dollar. Fifty years later, this pillar is showing signs of fatigue. Can the world muster the necessary cooperation to handle all that comes next?
Elmira Bayrasli: welcome to Opinion has it. I am Elmira Bayrasli.
It was the summer of 1944. World War II was raging and the world economy was in tatters. A peaceful and prosperous future characterized by global cooperation probably seemed like wishful thinking. And yet, at a remote hotel in Bretton Woods, New Hampshire, delegates from around the world laid the groundwork for it.
Archival recording: In Bretton Woods, New Hampshire, delegates from 44 Allied and Associated countries arrived for the opening of the United Nations Monetary and Financial Conference.
EB: The Bretton Woods conference gave birth to the International Monetary Fund and the International Bank for Reconstruction and Development, which would later become the World Bank.
Archival Recording: These meetings are designed to promote commerce in the post-war world and to lay the foundations for lasting peace.
EB: It also implemented a fixed exchange rate system. All national currencies were valued against the US dollar, which was convertible into gold at a fixed rate.
Archival recording: when you think of a global currency, what do you think of? Is it the US dollar because it accounts for almost 90% of forex, about 62% of foreign exchange reserves? It is called the petrodollar.
EB: But while the Bretton Woods institutions became pillars of the international order, the Bretton Woods exchange rate system only lasted until 1971.
Archival Recording, US President Richard Nixon: I have ordered Secretary Connally to temporarily suspend convertibility of the dollar into gold or other reserve assets.
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