International Monetary Systems
Since the late 19th century, the international monetary system has undergone several transformations in response to changing political and economic conditions. Write an essay outlining this evolution by evaluating the three major international monetary systems – the Gold Standard, the Bretton Woods system, and post-Bretton Woods. How did these systems differ in terms of how exchange rates are determined, the form that international reserves take, and the degree of government control over capital flows? Why did countries join the Gold Standard in the 19th century and why do some countries peg (i.e., fix) their currencies today? What are the political consequences of austerity that undermined the commitment to gold? What was the role of the United States in the Bretton Woods system, and how did its persistent payments deficits lead to Bretton Woods being abandoned? To what extent is the BW2 formula (i.e,, China accumulating massive dollar reserves, committed to export-led growth and maintenance of undervalued exchange rates, funding persistent US deficits and consumer spending) sustainable? Do you believe that the US dollar will remain the world’s key currency into the foreseeable future? Why or why not?
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