These two new books by well-credentialled economists examine the role of the US dollar in international finance. The story has its origins in the July 1944 meeting at the Mount Washington Hotel in Bretton Woods, New Hampshire, which established the post-Second World War international financial order.
The objective was to facilitate free trade based on convertible currencies and stable exchange rates. The troubled pre-war gold standard, where the standard unit of currency was a fixed weight of gold, was not considered feasible. There was insufficient supply of the precious metal to meet expected demands of international trade and investment in the post-war economy. The communist Soviet Union, emerging as a rival to the USA in the global order, also controlled a sizeable proportion of known gold reserves.
The debate came down to differences between John Maynard Keynes, representing the…
