Beyond Bretton Woods: When It Comes to Money, We Need a Common Discipline

What was Bretton Woods? A fixed exchange rate system? Yes. A gold exchange standard? Yes. More importantly, though, the agreement struck in 1944 was a macro-economic cooperative framework to promote international stability. The great merit of Bretton Woods was to subject member countries to a common discipline. Countries could not, under that regime, choose to overspend, to expand their borrowing beyond reason. Indeed, devaluations — which were the result of such lax policies — were under the control and conditionality of the International Monetary Fund, which was itself a creation of Bretton Woods. The system prohibited the repeated devaluations that…