The Bretton Woods system was not a monetary union but was, in its day, the nearest approach we had. It carried the seeds of its own destruction and inevitably came to an end. Indeed, to quote Peter Garber: 1 'The collapse of the Bretton Woods system … was one of the most accurately and generally predicted of major economic events … the general outlines at least of the key events from 1967-71 were foreseen, starting from the work of Triffin (1960).'
Ralph Hawtrey 2 can surely make an even earlier claim than Triffin. Writing in 1946, he asked how it is that 'a country incurs not merely a casual and momentary indebtedness but a progressively growing indebtedness?'. His answer, obvious to us now, was very perceptive at the time: 'That may in general be interpreted as a sign that the country's money is overvalued' (1946, 7, his emphasis).
Later (33-4) he commented that
Lord Keynes was not oblivious of the need for international cooperation to guard against undue monetary expansion. But he hardly accorded the need to prominence it merits … [but when the White plan was] put forward, there was no vestige in them of this vital provision. Nor does the Bretton Woods plan … contain any.
In his view (40) 'A country's right to alter the par value of its own currency should never be parted with', and he saw the Bretton Woods limitation as a serious danger, commenting, with prescience, that 'it is as important to avoid being entangled in an inflationary movement … as that it should resist the contagion of a deflation'.
Another collection of papers, as early as 1961, The Dollar in Crisis, edited by Seymour Harris, included contributions from the leading economists of the day. 3 It includes the text of the White House Message on the Balance of Payments and Gold, 6 February 1961.
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Publication information: Book title: A History of Monetary Unions. Contributors: John Chown - Author. Publisher: Routledge. Place of publication: New York. Publication year: 2003. Page number: 193.
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