International Monetary System from the Cold War to 2019


We are in an era of globalization. Different countries have to carry out economic and trade exchanges. Therefore, the study of the international monetary system is very important. Our group decided to study the evolution of the modern international monetary system. I am responsible for the study of changes in the international monetary system during the period from the Cold War to 2019.
By the end of the World War II, the United States became the biggest winner after the war, and guided the establishment of the international monetary system with the dollar as the center - the Bretton Woods system. The Bretton Woods system took the U.S. dollar as the international currency, implemented the adjustable fixed exchange rate system pegged to the U.S. dollar, and established the permanent international financial institution IMF, which ensured the normal operation of the world economy after the war to a certain extent. Therefore, the Bretton Woods system is an international monetary system with the dollar as the center but not free from the gold constraint (Subacchi, 2008).
After entering the 1960s, faced with successive dollar crises, the operation of gold dollar standard system was difficult to sustain. Therefore, the United States began to seek a new way to maintain the hegemony of the U.S. dollar. By suspending the convertibility of the U.S. dollar and gold, the establishment of the floating exchange rate system and the non- monetization of gold, the United States contributed to the disintegration of the Bretton Woods system and the establishment of the Jamaica system, promoted the formation of the new international monetary system with the dollar standard as the core, and maintained and consolidated the hegemony of the US dollar(Shu, 2017). In the 1970s, with the signing of the Jamaica Agreement, gold was de monetized and the floating exchange rate was institutionalized. The Jamaican system has strong adaptability and can effectively adjust international income and expenditure.
Since the establishment of the Jamaican system, the international monetary system has maintained the framework of the Jamaican system, and has also increased the introduction of foreign currency reserves, such as Pound, Yen, Euro, etc. On the one hand, in the Bretton Woods system, the currencies of various countries were only linked to the U.S. dollar, which led to the Triffin problem (Eichengreen, 2007). The introduction of multi-national currencies can make the system more flexible; on the other hand, the introduction of multiple currencies is a check and balance for the U.S. dollar, which can reduce the dependence of other countries on the U.S. dollar, restrain the United States from adopting economic policies with negative externalities.
The basic pattern of today’s international monetary system is that the U.S. dollar and the Euro still dominate (Jiang, 2011). This is determined by the strength of these two major economies. The U.S. dollar and the Euro are competitive, and the status of developing countries in the international monetary system Inequality, developing countries want to safeguard their own financial interests and establish their own currency union to fight the U.S. dollar like the Eurozone, which may be a viable option.
In recent years, digital currency has been widely discussed. Will it change the existing Jamaican system as a new currency? Maybe we will witness in the future.

Thanks for taking time to read this blog post.


Written by Chuantong Wei




References List:
[1].Subacchi, P(2008), From Bretton Woods onwards: The Birth and Rebirth of the World's Hegemon[J]. Cambridge Review of International Affairs, 2008,21(3), pp.347-365.

[2].Shu, J(2017), On the Disintegration of Bretton Woods System. Journal of Southwest University. 2017(3), pp174-181.

[3]Eichengreen, B(2007), Global Imbalances and the Lessons of Bretton Woods[M]. Cambridge: The MIT Press, 2007;48.

[4]Jiang, X(2011), The prospect of the Eurozone and its impact on the reform of the international monetary system. Financial Times. 2011.11.14(009).

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