New Bretton Woods Today? Or Currency Wars Ahead?


bretton woods nh.jpg
About three hundred people have assembled this weekend at the Omni Mt. Washington Hotel — site of the famous 1944 economic conference at which the global economic system of currency exchange, the establishment of the US dollar as the key reserve currency, and the establishment of the International Monetary Fund occurred — under the auspices of a major meeting organized by the Institute for New Economic Thinking.
John Maynard Keynes Bust.jpgIn 1944, 735 delegates representing 44 nations attended. They met for three weeks, while we are here for three days. Washington, DC would have been a more natural site for the meeting but economic wunderkind John Maynard Keynes pleaded with the Americans not to host a July conference in Washington, according to IMF historian James Boughton.
Some cities would not host the delegation because of the non-Caucasian status of many of the delegates. New Hampshire became a natural choice both because of the comparatively progressive racial views at that time of the state and its perceived power in the DC political scene.
One thing I didn’t know about the lore around the conference is that John Maynard Keynes had a minor heart attack here, working hard to unsuccessfully preserve the status of the British sterling and the once hegemonic role that the United Kingdom played in the pre-Bretton Woods global economic order. At the end of the conference, Keynes gave remarks in a room where I am now sitting stating that it’s better for a global arrangement to start in “disillusion” rather than to end in it.
Keynes and his wife, Lydia Lopokova, stayed in room 219 where she practiced ballet steps much to the consternation of US Treasury Secretary Henry Morgenthau and his wife who were just below them in suite 119.
martin wolf inet 2011 conference.jpgDespite Keynes’ disappointment in the results of the meeting, Keynes’ own thinking and writing — particularly in his publication eight years earlier of “The General Theory” — had profound positive effect on the world whose delegates had become comfortable with the proposition that a government’s policies could be structured in order to preference full employment. Nations were weary from the war — and the viral app that everyone was grasping for was an equation of “prosperity and peace.”
Harry Dexter White from the US delegation emerged as the key personality who shaped the meeting and its outcome with White and Keynes essentially, ultimately laying the foundation for passage of British global economic hegemony to the Americans — who were still mostly reluctant to step forward as the world’s leader of last resort.
Martin Wolf of the Financial Times said last evening after James Boughton’s fascinating offering on the historical context of our meeting that 1944 Bretton Woods was important for what it accomplished in its time — but many parts of the essential deal on fixed rates of exchange collapsed forty years ago in 1971 when Richard Nixon terminated dollar convertibility into gold.
Wolf pointed out that we continue to be fascinated by a failed global deal because the architecture of that deal and the global consensus achieved to reach it remain a powerful historical metaphor for us today. Wolf suggested that concern about assumptions in modern economic theory and the gathering roster of destabilizing global economic shocks was leading some to think that yet again many were murmuring that a “new Bretton Woods” was needed.
In other words, “new economic thinking” is needed — and one feels that urgency in the meeting here of many of the world’s leading economic thinkers.
— Steve Clemons


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