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


6 comments on “New Bretton Woods Today? Or Currency Wars Ahead?

  1. questions says:

    Off any topic, but so well worth noting that I’m going to post this.
    This is a piece on meth-addicted babies in Maine. It’s apparently not very easy to be a meth-addicted baby and doctors are trying to figure out what to do for them. Opiate addiction and withdrawal are horrible to go through, and more horrible in-utero or just after birth. There are unknown future cognitive effects.
    Funny thing about the whole tone of this article — it’s gentle. There’s no cry for increased penalties for these women. One of the women described in the article works a night shift in a bakery and everyone there uses pain meds to get through life. It’s widespread, it’s in the local culture of pain relief to get through the world, the pregnancies happen to these often young women, and everyone is understanding, nice, patient, suffering along with them.
    Think about that phrase — the culture of pain relief.
    So what’s the difference between crack babies and meth babies?
    I don’t think I even have to answer.
    Clearly time has passed, but, you know, we can still generate some serious, and seriously crazed, panics over things of this nature. So it’s probably not time.
    Hmmmm. I’ll have to think about this. Rural Maine. Hmmmm.
    And for my part in irritating people with […]language, sorry. I will restrain the impulse because I’m pretty sure one or two of my posts were yanked. And actually, if the offending phrase is the one I think it is, I regretted it moments after posting, but there’s no going back and editing. In my very next set of posts I changed the reference system. Sorry for the error in judgment.
    I still value this place tremendously as a way to collect my thinking and consolidate the day’s readings and to communicate some of what seems central in the policy universe, which is the only universe!


  2. Warren Metzler says:

    I find people’s acceptance of economics to be fascinating. Its record of success (more accurately its total lack of success) rivals that of the field of “intelligence”.
    I have read Adam Smith’s original treatise, and Keynes main book, and a host of other writings on economics. I defy any one to read Keynes book and tell me a single calculation in that book that accurately predicts anything, or gives a rational (supported by long term results) review of anything; or even better, is comprehensible.
    I loved the anecdote of Keynes wife dancing at all hours of the night in her room. When a woman is totally inconsiderate of others; I’m sure a man of Keynes stature could have arranged for her to have a ground floor somewhere in the hotel to conduct her dance practicing; she would only attract a man who was correspondingly totally inconsiderate as to whether what he proposed had practical value.
    It is clear to me, that all economists believe that humans act as one when they do work to earn money, and when they spend money; which must be so, in order to use mathematical equations to determine economic conclusions. Since the truth is that every human is unique, and no two humans have the identical context from which they operate to choose what type of work to do or how to perform that work; nor are there any two humans who choose how to spend money in the same way. So it is literally impossible to use a mathematical equations to determine any economic action that should be taken. Therefore each and every economic decision that has been made by a government, a company, or an individual, based on any economic theory, in the 200 plus years since Adam Smith created the field, has been erroneous, and it is time we face that fact. Which would save us a huge amount of money, making that money available for productive use.
    You only need common sense and some real life experiences to know that you shouldn’t spend more than you take in; which makes deficit spending counter-productive always, regardless of the reason for it.
    You don’t need economic theory to have a central bank that provides liquidity and inter banking actions (such as check clearing and money transfers) in the banking business. Or to determine that banks need to be required to keep a reserve that is a percentage of deposits for rainy days.
    And any attempt to predict the future of anything; including tax receipts or expenditures; is a total waste of time. No human is ever authentically clairvoyant. Learn from daily life experiences to determine what principles exist; each valid principle being a directive that if followed always eventually leads to a successful outcome (a result that is excellent, and each participant thoroughly enjoying doing that activity); plus learn to recognize valid inspirations that appear within; and you can always choose how to act now in a way that repeatedly moves us forward.
    Does anyone not get that it is insane to have a government spend 25% of all the money that is earned in that country in a year???? From where did this idea of massive spending arise? Certainly not in the mind of a person with common sense.


  3. questions says:

    Japan update — this one is way above my paygrade, and the author suggests that there might be missing data, but that the calculations are the most pessimistic whenever there was a choice to make:
    “There are lots of other problems with this estimate: the calculations are primitive and are based on many simplifying assumptions. Overall, I think we can take this value (525 cancers) as the upper limit of final cancers over the next 30 years. During this same period, approximately 138,000 people in Fukushima Prefecture will die of cancer, so the deaths arising from this accident will not be statistically detectable. For purposes of deciding between coal power plants and nuclear power plants, the best estimate for coal plants is several thousand deaths per coal power plant over its lifetime.”
    This kind of read is common at Brave New Climate, and it may be the right way to read the death toll, but there is a political problem in that these deaths might not be the ones we “want” and the state MUST be responsive to the deaths we want.
    Indeed, the whole point of there being a state is to regulate the deaths and keep us from dying in ways we don’t wish to die. When the state fails this job, the state fails.
    The pro-nuke crowd tends to dismiss this point. They shouldn’t.
    The anti-nuke crowd tends to dismiss the number of deaths from fossil fuels. They shouldn’t.
    We really need to figure this out, both at the policy and at the emotional levels. I don’t know that we can.
    From Kyodo:
    “Tokyo Electric Power Co. started Saturday to install enclosing materials in the sea to prevent a further spread of highly radioactive water that seeped from a crisis-hit nuclear power plant, while continuing other efforts to stabilize Japan’s worst nuclear crisis.”
    and this:
    “Radioactive cesium above the legal limit for consumption was detected Saturday in young sand lance caught off Fukushima Prefecture, as the prefecture took samples amid a voluntary ban on fishing there in the wake of the ongoing nuclear crisis.
    One of the four sample fish had a level of cesium of 570 becquerels per kilogram on Thursday about 1 kilometer off the city of Iwaki, and the other three measured 480 to 500 becquerels. The limit is 500 becquerels under the Food Sanitation Law.
    The samples were taken after the species was found contaminated off Ibaraki Prefecture, although fishermen have voluntarily refrained from fishing off Fukushima due to the crisis at the Fukushima Daiichi Nuclear Power Station.
    Radioactive iodine measured 1,100 to 1,700 becquerels in the samples against the legal limit of 2,000 becquerels.”
    and this:
    “U.S. nuclear regulators are considering reviewing its evacuation advisory for Americans living within an 80-kilometer radius of the stricken nuclear plant in Japan’s Fukushima Prefecture as radioactive substances in areas beyond 40 km of the plant have subdued to levels that require no evacuation, regulatory officials said Friday.”
    This from NEI dot org:
    “Workers continue to use backup pumps to inject cooling water into reactors 1, 2 and 3 at the Fukushima Daiichi site. Spraying water onto the used fuel pools of reactors 1-4 continues on an as-needed basis. TEPCO also continues to inject nitrogen gas into the primary containment of reactor 1. The nitrogen will prevent possible ignition of hydrogen that may be accumulating in the containment.
    TEPCO is preparing to fly a small, unmanned helicopter over the plant to take infrared photos of areas that have been out of reach. The photos may help the company plan its restoration work.

    A long update with day-by-day events from Brave New Climate. No link, so as to avoid the 2-link rule….
    There’s a picture of the floating island — it’ll arrive at Fukushima in a couple of weeks according to the piece.
    And kos, again, the regular daily update ROV diary:


  4. DakotabornKansan says:

    Paul Krugman famously said that much of recent macroeconomics had been


  5. Emanuel Pastreich says:

    Here is the proposal I put forward for a new
    Bretton Woods. Let me know what you think.
    The Eco-Currency: A Proposal
    Emanuel Pastreich
    Monday, March 1, 2010
    The environmental challenges we face today compel
    us to reconsider the conventional economic concept
    of growth and recognize that it cannot be easily
    reconciled with the dangerous implications of
    runaway consumption and unlimited development.
    The obvious solution to the environmental crisis
    is to devise a mechanism that will link the health
    of the global ecosystem directly to the economic
    rules that undergird all aspects of global
    finance, trade and investment in the post Cold-War
    era. That is to say, the environment must be
    embedded deeply into the heart of the global
    financial system and its roots must extend into
    the concepts by which we assess growth and imagine
    the economy.
    We would like to propose here that the most
    appropriate starting point for such a reform of
    our concept of the environment and its economic
    significance is with currency itself. The
    international community should establish an eco-
    currency that will serve either as a universal
    currency or as a factor that significantly impacts
    all the global currencies linked to the IMF . How
    much of that currency a nation possesses will be a
    reflection of its environmental policies. Such a
    mechanism stands the best chance of encouraging
    significant progress on the environmental front.
    If the eco-currency serves as one of several
    factors impacting all global currencies, it might
    serve as something akin to the SDR (special
    drawing rights) system currently employed by the
    International Monetary Fund. According to the IMF
    website, member [nations] with sufficiently strong
    external positions are designated by the Fund to
    buy SDR s with freely usable currencies up to
    certain amounts from members with weak external
    positions. That strong external position could be
    redefined so as to consist primarily, or entirely,
    of environmental criterion.
    The eco currency could also serve as a gold
    standard for all nations of the world, permitting
    each nation to increase its money supply in direct
    proportion to the environmental credits that it
    has accumulated through wise and effective
    policies by reducing emissions and preserving
    water and soil. After all, in that the gold
    standard was based on a mineral that was
    exceptionally rare and valuable, it is a logical
    extension of that concept to argue that a healthy
    ecosystem is the most valuable commodity
    available. In fact, the ecosystem is far more
    valuable than gold because it is so critical to
    human life. Each nation would continue to have
    sovereignty with regards to its own currency, but
    the calculation of that currency will take into
    account the environmental status of each country
    and its share of a calculated total of
    environmental credits for the entire world.
    Whether it served as a universal currency, or as a
    factor impacting all hard currencies, the eco-
    currency available to the world would be
    calculated as equal to a total global sum of
    environmental credits. Those credits would be
    assigned to a country based on an evaluation of
    how good a job that nation does reducing harmful
    emissions, preserving undeveloped lands, caring
    for its water supplies and otherwise implementing
    policies that have a positive effect on the
    environment. Although the calculation of what the
    total number of environmental credits for the
    world should be and the division of that total
    number between the nations of the world would be
    difficult, and at times political, it would by no
    means be an impossible task.
    Such an international currency program based on
    environmental credits would make the abstractions
    of carbon trading far more palpable and more
    visible in the financial world. The policy would
    require all makers of fiscal and developmental
    policy at the local level to engage in a serious
    debate on the implications of their policies for
    climate change as part of their economic policies.
    No longer would it be possible to think separately
    about monetary policy and environmental policy;
    the two would be effectively yoked together. By
    reflecting the consequences of good environmental
    policy at the core of our future economic system,
    we can ensure that environmental issues cannot be
    put on the back burner.


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