From Bretton Woods to our days: Historic mistakes and models for a sustainable international monetary system

Abstract

There is a parallel amongst the stability mechanism defined in the Versailles conference of 1919 and the conclusions of the Bretton Woods conference in 1944. Whilst in Versailles the decision was for a smooth return to gold standard schemes, which indeed happened in most of the concerned countries by the mid- ‘20s, at Bretton Woods the preferred option was leaning towards an asymmetric international monetary system, centered on the US dollar, in turn pegged to gold. By this mechanism the US dollar became the global reference currency. The end of the Bretton Wood mechanism was triggered by US president Nixon to de-peg the dollar from gold on August 4th, 1971. By then, and until nowadays, a large international debate about the possibility to create a new tool for settling currency positions amongst central banks took more and more momentum.