Is This Bretton Woods 2.1?
BRETTON WOODS 2 may be in the process of a revamp but it wouldn’t be an upgrade. More than a picturesque town in New Hampshire, Bretton Woods gave its name to the post-World War II international monetary system that featured fixed exchange rates for currencies versus the dollar, while the U.S. currency was anchored in terms of gold at $35 an ounce. The system unraveled when Richard Nixon abrogated that promise in 1971 to redeem dollars (to foreign monetary authorities) in gold, which then triggered the surge in oil prices and the double-digit inflation of the ensuing decade. Bretton Woods 2 is what the name given to the current ad hoc arrangement whereby creditor nations, especially China, accumulate massive amounts of dollars and relend them to the No.1 debtor nation, the U.S. While symbiotic, creditor nations, notably but not solely China, are becoming restive about amassing greenbacks ad infinitum. That’s because they’re worried about the risk their dollars will lose value, as they
