Working Papers

Bretton Woods Revivalism in the WSJ

More tiresome hard money ratbaggery in the WSJ, this time from Bretton Woods revivalist, Judy Shelton:

The massive currency swings that reign between the dollar, the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc wreak havoc on demand-and-supply outcomes for goods traded across borders. The New York Board of Trade’s U.S. Dollar Index, which tracks the dollar’s value relative to a basket of those six other currencies, has tumbled 34% since its July 2001 peak. Why pontificate about the importance of eliminating tariffs to promote open markets when the impact of a gyrating dollar is far more devastating, far more protectionist in its effect on global free trade?

It is time for the U.S. to acknowledge what we have tried to wave off under the pretense of allowing free markets to decree the value of our currency.

If we truly believe in a global marketplace where outcomes are determined by competition and competence, not localized monetary policies, we need a global monetary unit of measure. We need a meaningful global currency.

Bretton Woods broke down precisely because fixed exchange rates wrecked havoc by transmitting economic shocks, including monetary and fiscal policy mistakes, around the world.

posted on 27 September 2007 by skirchner in Economics, Financial Markets

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