Not floating, but flailing

SEVENTY years ago this month, 730 delegates gathered in Bretton Woods, New Hampshire to reopen an old debate. Global commerce has long faced a fundamental tension: the more certainty countries create around exchange rates, the less room they have to manage domestic economic affairs. Thirty years before Bretton Woods a war wrecked the world’s first stab at the problem—the gold standard—and the attempt to rebuild it in the 1920s led to depression and another war. The exchange-rate system agreed at Bretton Woods lasted only a generation. After 150 years of experimentation the world has yet to solve its monetary problem.

Most monetary systems have been the product of accident rather than design. The classical gold standard developed in industrialising Britain. Its economic success encouraged others to transact on its terms. Germany’s adoption of gold in 1871 put Europe’s two leading economies on one standard; others quickly followed suit.