A stable, global monetary order? Be prepared for change
Currencies are fiat, the ties to gold are gone, and most exchange rates for the major currencies are freely floating
This week marks the 75th anniversary of the Bretton Woods agreement, formulated among 44 allied nations in a New Hampshire hotel. To me, the most remarkable thing about the agreement is not that it collapsed but that it ever existed in the first place — and what that says about such arrangements more generally. By which I mean: every era’s monetary institutions are virtually unimaginable until they are created. Looking forward, don’t assume the status quo will hold forever — rather prepare to be shocked.
Consider the broader history of monetary and financial institutions. The gold standard (and sometimes bi-metallic) regime that marked the Western world from 1815-1914 was without precedent. In medieval times, gold, silver, copper and bills of exchange — from multiple issuers — all circulated as means of payment, and often there was no single dominant form of money. As the gold standard evolved, however, claims to gold became a global means of settling claims and easing foreign...