Putting the ‘System’ in the International Monetary System

A super paper by super econ historians – Michael D. Bordo and Angela Redish.

They track how this so called international monetary system became a system involving very complex ideas and coordination:

The international gold standard of the late nineteenth century has been described as a system of ‘spontaneous order’, capturing the idea that its architects at the time were fashioning domestic monetary systems which created a system of fixed exchange rates almost as a by-product. In contrast the framers of the Bretton Woods System were intentional in building an international monetary system and so it is by advocates of designing an international monetary order.

In this paper we examine the transition from spontaneous order circa 1850 to designed system and then back towards spontaneous order in the late twentieth century, arguing that it is an evolution with multiple stops and starts, and that the threads that underlie the general tendency through these hesitations are the interplay between monetary and fiscal factors and the evolution of the financial system. This transformation is embedded within deep evolving political fundamentals including the rise of democracy, nationalism, fascism and communism and two world wars.

 The paper is very brief given the scope but forces you to think on many points for more clarity. This is such a rich subject which covers many ideas under the sun. Understanding how monetary systems evolve is fascinating by itself and figuring IMS makes it really intriguing stuff..

Much of the ideas are a myth. Like how Gold Standard  was a natural monetary system whereas it was manmade. At the end of the day what matters is how various political forces interplay and commit themselves to certain systems..


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