Ideas, Interests, and the Transition to a Floating Exchange System

2020 ◽  
Vol 32 (2) ◽  
pp. 151-182
Author(s):  
YOUN KI ◽  
YONGWOO JEUNG
Keyword(s):  
Exchange Rates ◽  
International Monetary System ◽  
Business Leaders ◽  
Business Practices ◽  
Global Finance ◽  
Economic Interests ◽  
Monetary System ◽  
The Us ◽  
Us Government ◽  
Material Interests

Abstract:Milton Friedman’s idea of flexible exchange rates was heresy for Americans until the mid-1960s. However, by the late 1970s the idea became embedded in academic thought, policymaking, and business practices. This article analyzes how floating currencies, once eschewed, became embraced as legitimate in the US through the late 1960s and early 1970s. It demonstrates how business leaders’ economic interests and laissez-faire economists’ framework for causes of and solutions to business hardships contributed to society’s acceptance of currency flexibility. Increasing societal support of flexible currencies strengthened the power of float-advocates within the US government, facilitating the transition of the international monetary system from fixed exchange rates to floating. This study highlights how material interests and policy discourses contributed to America’s new policy orientation. It also addresses the origins of the neoliberal international financial order by documenting how American elites reconstituted the state-market balance in global finance while navigating monetary crises.

The Long-Predicted Failure of the Post-Bretton Woods “Non-System”

2022 ◽  
pp. 1-8
Keyword(s):  
Saudi Arabia ◽  
Exchange Rates ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
Us Government ◽  
Oil Shock ◽  
World Economic ◽  
Us Dollar

The monetary system implemented at Bretton Woods in 1944 made the US dollar the centre of the world economic system, with 43 other countries' currencies linked to it via fixed exchange rates. However, once the US government broke its promise to redeem dollars in gold at $35 per ounce on August 15, 1971, expansion of the supply of dollars was no longer constrained, and like many currencies before it, the lack of monetary discipline led to inflation through which the value of the dollar has fallen by about 98%. The “oil shock” of the 1970s led to the introduction of the “petro-dollar” system whereby Saudi Arabia, then the largest oil producer, agreed to accept only US dollars in payment for its oil in exchange for the US government's pledge to defend it. This shored up demand for the fiat US dollar, enabling it to survive until its now approaching endgame.

scholarly journals A Brief History of the International Monetary System since Bretton Woods

2017 ◽  
Author(s):  
José Antonio Ocampo
Keyword(s):  
Global Economy ◽  
Ad Hoc ◽  
International Monetary System ◽  
Negative Effects ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
Us Government ◽  
History Of ◽  
The 1960S

The 1944 Bretton Woods Conference, which created the International Monetary Fund and the International Bank for Reconstruction and Development, was a major landmark in international cooperation. However, the Bretton Woods system came under increasing pressure in the 1960s due to the lack of a reliable adjustment mechanism to manage payment imbalances as well as the persistent asymmetries in the balance-of-payments pressures faced by surplus and deficit countries. In 1971 the system effectively collapsed when the US government suspended convertibility of dollars into gold for other central banks—a decision that would prove to be permanent. The system that evolved to replace it can be viewed as a ‘non-system’ with diverse ad hoc arrangements. Viewed overall this non-system has proved to be fairly resilient, but some of its major gaps continue to have negative effects on the global economy.

scholarly journals The US dollar and new imperialism under the logic of capital accumulation

2019 ◽  
Vol 2 (1) ◽  
pp. 98-107
Author(s):  
Haiping Qiu ◽  
Min Zhao
Keyword(s):  
Capital Accumulation ◽  
International Monetary System ◽  
Content Type ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
The Status ◽  
The Usa ◽  
New Imperialism ◽  
Us Dollar

Purpose The world currency is endowed with two inherent contradictions, namely, the general contradiction of all currencies and the special contradiction between the quality and quantity of the world currency. The paper aims to discuss these issues. Design/methodology/approach In the wake of the Second World War, the USA, with its strong economic and military strength, established an international monetary system centered on the US dollar (USD). This gave USD the status of “world currency” and bounded it to the US imperialist hegemony with mutual integration and interaction, making it possible for USD capital to conduct international exploitation and wealth plundering extensively around the world. Findings The contradiction between the capital logic and the power logic, which is inherent in capital accumulation models of the new imperialism, also indicates the inevitable decline of USD. Originality/value This constitutes an important feature of the new imperialism. However, as a sovereign currency, USD has inextricable and inherent contradictions while exercising its function as the world currency.

scholarly journals International Monetary Relations: Taking Finance Seriously

2017 ◽  
Vol 31 (3) ◽  
pp. 3-28 ◽  
Author(s):  
Maurice Obstfeld ◽  
Alan M. Taylor
Keyword(s):  
Exchange Rates ◽  
International System ◽  
Current System ◽  
International Monetary System ◽  
Balance Of Payments ◽  
Minimal Risk ◽  
International Liquidity ◽  
Monetary System ◽  
Financial Conditions ◽  
Monetary Relations

In this essay, we highlight the interactions of the international monetary system with financial conditions, not just with the output, inflation, and balance of payments goals usually discussed. We review how financial conditions and outright financial crises have posed difficulties for each of the main international monetary systems in the last 150 years or so: the gold standard, the interwar period, the Bretton Woods system, and the current system of floating exchange rates. We argue that even as the world economy has evolved and sentiments have shifted among widely different policy regimes, there remain three fundamental challenges for any international monetary and financial system: How should exchange rates between national currencies be determined? How can countries with balance of payments deficits reduce these without sharply contracting their economies and with minimal risk of possible negative spillovers abroad? How can the international system ensure that countries have access to an adequate supply of international liquidity—financial resources generally acceptable to foreigners in all circumstances? In concluding, we evaluate how the current international monetary system answers these questions.

scholarly journals Changes in the international monetary system: opportunities and risks for the US dollar

2020 ◽  
Vol 183 (5-6) ◽  
pp. 4-16
Author(s):  
Alicja Sielska ◽  
Keyword(s):  
Research Question ◽  
International Monetary System ◽  
Balance Of Power ◽  
Monetary System ◽  
National Currencies ◽  
The Us ◽  
Leading Position ◽  
Us Dollar ◽  
Global Arena ◽  
European Economies

In the 1940s, the US dollar was established as an international currency. Since then, its position has been practically unchallenged. However, in light of the financial crisis of 2008, the strengthening of the Chinese and European economies, and the COVID-19 pandemic, it is necessary to reflect on the future balance of power in the international monetary system. To this end, this article poses the following research question: is the US dollar facing a threat to its leading position in the global arena? First, I describe the historical currency system and the position of the dollar after the 2008 crisis; next I analyze the pandemic up through the end of June 2020. Then, I consider three possible scenarios for the dollar. First, it is possible to create a new global currency which would consist of a basket of the five most important world currencies. The second option is to replace the dollar with another currency, especially the euro or the renminbi. The third and most probable scenario is the compresence of several competing national currencies in international trade. Abandoning the dollar is possible, but it would require significant financial and institutional changes. This means that in the absence of any easy solutions for dethroning the US currency, it will remain the world’s leading currency.

The role of the developing countries in the international monetary system

1982 ◽  
Vol 8 (2) ◽  
pp. 99-115
Author(s):  
Stephen C. Neff
Keyword(s):  
Developing Countries ◽  
Exchange Rates ◽  
Exchange Rate Regime ◽  
International Monetary System ◽  
Interesting Phenomenon ◽  
Legal Structure ◽  
Monetary System ◽  
Monetary Regime ◽  
Floating Exchange Rate ◽  
The One

The present international monetary regime has been characterized as a ‘non-system’, an assessment containing an important element of truth from both the economic and juridical standpoints. Indeed, the (more or less) freely floating exchange rate regime which has prevailed in fact since the upheavals of 1971–73 and in law since 1978 is not so much a system as a collective admission that no system is really feasible in the context of the present world economy. A close look at the present order, however, reveals a very interesting phenomenon the importance of which, unfortunately, is sometimes obscured because it is not reflected in any formal legal structure: this is the de facto division of the world into a two-tier order consisting of industrialized states on the one hand, which generally maintain flexible exchange rates, and developing countries on the other hand, which typically have chosen to fix their exchange rates (either against one of the major currencies, or else against a basket of currencies).

scholarly journals Stablecoins, Central Bank Digital Currencies and US Dollar Hegemony

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Luca Fantacci ◽  
Lucio Gobbi
Keyword(s):  
First Generation ◽  
International Monetary System ◽  
Global Scale ◽  
Electronic Payment ◽  
Payment Systems ◽  
Monetary System ◽  
Payment Instruments ◽  
The Us ◽  
Us Dollar ◽  
Main Flaw

Abstract Stablecoins are second generation cryptocurrencies, aimed at maintaining their value stable with respect to official currencies. The most famous example is perhaps represented by libra, the cryptocurrency announced by Facebook in 2019 and yet to be issued; the most widespread is tether, with a market capitalization of almost 10 billion dollars and a daily transaction volume of almost 50 billion dollars, which makes it the most used cryptocurrency. The diffusion of stablecoins is hardly surprising. By minimizing volatility – the main flaw of first generation cryptocurrencies, including bitcoin –, stablecoins are expected to play an even more important role on a global scale within a few years. Our contribution deals not with the economic, but specifically with the geopolitical factors that could foster the use of stablecoins for strategic and military purposes. In particular, we focus on how such payment instruments, together with other alternative electronic payment systems, could be used as a means to circumvent economic sanctions and ultimately as a challenge to the hegemony of the US dollar in the international monetary system.

The Principles and Operation of the Bretton Woods International Monetary System in the Years 1944–1971. The Reasons for Its Collapse

2016 ◽  
Vol 8 (2) ◽  
pp. 0-0
Author(s):  
Zbigniew Klimiuk
Keyword(s):  
International Trade ◽  
World Economy ◽  
International Monetary System ◽  
The United States ◽  
International Liquidity ◽  
Bretton Woods ◽  
Monetary System ◽  
The Us ◽  
The World ◽  
The Stability

The subject of the article is an analysis of the role of the US dollar in the development of international trade and the world economy during the period of the Bretton Woods monetary system (1944–1971). The international monetary system existing at that time was, in principle, a gold exchange standard based mainly on the national currency of the United States. However, a relatively small role was also played by other currencies including, in particular, the pound sterling. It should be noted that the Bretton Woods rules did not match the conditions in the world economy which emerged after World War II. The main areas of criticism concerned such assumptions as the maintenance of an official fixed price for gold, or a too narrowly interpreter postulate for the stability of the exchange rate. On the other hand, it should be noted that the introduction of the stability of exchange rates and the abolition of restrictions on payments were fundamentally sound decisions. They led in fact to the minimisation of a risk inherent in international trade and its rapid growth. One should also emphasise the fact that from the very beginning, in the international gold based monetary system there was an internal contradiction (paradox), which eventually led to its collapse. This was namely the fact that the growth in world trade created a growing demand for international liquidity. This was tantamount to a necessity to maintain a permanent balance of payments deficit in respect of the country whose currency was considered the key currency. At the same time, the growing volume of the US currency resulted in an increasing crisis of confidence in the dollar.

What the US Should Learn from China for a More Balanced and Peaceful World

2012 ◽  
Vol 5 (3) ◽  
pp. 50-63 ◽  
Author(s):  
Fabio Massimo Parenti
Keyword(s):  
United States ◽  
Global Economy ◽  
International Monetary System ◽  
The United States ◽  
Economic Governance ◽  
Social Scientists ◽  
Systematic Analysis ◽  
Monetary System ◽  
The Us ◽  
The U.S

The growing importance of China in the global economy affects the reconfiguration of the international geography of power. In this scenario, the geopolitical order will be significantly redefined by the evolution of relations between China and the U.S. Based on the outcome of previous studies, and on the extensive efforts made by some social scientists, this paper provides a systematic analysis of the complexity and strategic implications of China–US relations. To make sense of these multivalent relations, after an initial introduction the paper is organized in three sections. The first section explores the structurally asymmetrical nature of relations between China and the US, focusing on economic policy decisions made by national elites. The second section focuses on the deepening U.S. debt, also underscoring the latest transformation trends experienced by an international monetary system that is still dollar–centred, and which several parties deem to be unsustainable. Lastly, the third section tries to provide evidence that growing instability in the global geopolitical order is intimately related to the economic and financial unbalances between China and the U.S. Hence, promoting more effective cooperation between China and the United States seems to be a priority. As substantiated in this paper, cooperation should, however, make the most of the Chinese developmental path, compared to that adopted by the United States – in terms of economic governance and geopolitical developmental path.

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