“Bretton Woods II” is a term used by media
Contents
- 1 History
- 2 Previous informal usage
- 3 Governments invited to the new Bretton Woods Conference
- 4 Issues and institutions that will be up for discussion at the proposed meeting
- 5 See also
- 6 Further reading
- 7 References
//
History
On September 26, 2008, French, and current European Union president, Nicolas Sarkozy, said, “we must rethink the financial system from scratch, as at Bretton Woods.”
On October 8, 2008, Argentine President Cristina Fernandez de Kirchner said “the financial world crisis will need a strong regulation in the matter of financial markets and capital movements throughout the world. A new Bretton Woods will be needed”.
On October 13, 2008, British Prime Minister Gordon Brown said world leaders must meet to agree to a new economic system. “We must have a new Bretton Woods, building a new international financial architecture for the years ahead.”
Italian Economics Minister Giulio Tremonti has said that Italy will use its 2009 G7 chairmanship to push for a “New Bretton Woods.” He has been critical of the U.S.’s response to the global financial crisis of 2008, and has suggested that the dollar may be superseded as the base currency of the Bretton Woods system.
Previous informal usage
Bretton Woods II was an informal designation for the system of currency relations which developed during the 2000s. As described by political economist Daniel Drezner, “Under this system, the U.S. is running massive current account deficits to be the source of export-led growth for other countries. To fund this deficit, central banks, particularly those on the Pacific Rim, are buying up dollars and dollar-denominated assets.”
History of the informal usage
The notion of a “revived Bretton Woods system” was introduced in a 2003 paper by Dooley, Folkerts-Landau, and Garber, in which it is described as arising after the end of the Cold War, out of the choice of countries,
mainly in Asia,
In 2005, Roubini and Setser argued that the system is unsustainable:
If the US does not take policy steps to reduce its need for external financing before it exhausts the world’s central banks willingness to keep adding to their dollar reserves – and if the rest of the world does not take steps to reduce its dependence on an unsustainable expansion in US domestic demand to support its own growth – the risk of a hard landing for the US and global economy will grow. The basic outlines of a hard landing are easy to envision: a sharp fall in the value of the US dollar, a rapid increase in US long-term interest rates and a sharp fall in the price of a range of risk assets including equities and housing. The asset price adjustment would lead to a severe slowdown in the US, and the fall in US imports associated with the US slowdown and the dollar’s fall would lead to a global severe economic slowdown, if not an outright recession.
Governments invited to the new Bretton Woods Conference
The formula will be “G-7 plus”. In announcing the summit, US President George Bush said that summit would bring together members of the G20 industrial nations. The G-20 is made up of the G7 plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, and the European Union. The IMF and the World Bank also participate in G-20 meetings. The G-20 was set up to respond to the financial turmoil of 1997-99 through the development of policies that “promote international financial stability”. The G-20 comprises countries considered to be systemically important, but omits over 170 governments (192 governments are members of the United Nations).
Issues and institutions that will be up for discussion at the proposed meeting
There is no official agenda for the meeting as yet. German Chancellor Angela Merkel and French President Nicolas Sarkozy said “Bretton Woods II” should bring about “genuine, all-encompassing reform of the international financial system”. The Council of the European Union sees the meeting as “tak early decisions on transparency, global standards of regulation, cross-border supervision and crisis management, to avoid conflicts of interest and to create an early warning system, so as to engender confidence among savers and investors in every country.” In announcing the meeting, the spokesperson for US President George Bush said that “leaders will review progress being made to address the current financial crisis, advance a common understanding of its causes, and, in order to avoid a repetition, agree on a common set of principles for reform of the regulatory and institutional regimes for the world’s financial sector”. UK Prime Minister Gordon Brown, in a mid-October speech, set out several principles. These include transparency (internationally agreed accounting standards, credit insurance market standards), integrity (credit agencies, executive pay), responsibility (board member competency and expertise), sound banking practice (protecting against speculative bubbles).
The new international architecture Brown and others are discussing will allegedly involve an effective global early warning system for risk prevention, globally accepted standards to supervise cross-border capital flows and the activities of global firms, and stronger institutions for cooperative action in the event of crises. For CSOs it will be important that equity as well as stability is discussed at the conference and that fairer rules are developed for aid, debt, trade, investment, taxation and capital flight. The governance of the international financial institutions must be radically changed, fair debt workout mechanisms introduced, and much more.
See also
- Global financial crisis of 2008
- Foreign exchange reserves
- Exchange rate regime
Further reading
- Eurodad: Bretton Woods II conference FAQs
- Eurodad: IMF back in business as Bretton Woods II conference announced
References
- ^ George Parker, Tony Barber and Daniel Dombey (October 16, 2008). “European call for ‘Bretton Woods II’”.
- ^ Eurodad (October 16, 2008). “European call for ‘Bretton Woods II’”.
- ^ George Parker, Tony Barber and Daniel Dombey (October 9, 2008). “Senior figures call for new Bretton Woods ahead of Bank/Fund meetings”.
- ^ Página12 (October 8, 2008). ““Será necesario un nuevo Bretton Woods””.
- ^ Agence France-Presse (AFP) (October 13, 2008). “World needs new Bretton Woods, says Brown”.
- ^
- ^ Italy queries dollar’s role in Bretton Woods reform. Reuters, October 16, 2008.
- ^ Parmy Olson and Miriam Marcus. Bringing The Banking Mess To Broadway. Forbes (online), October 16, 2008.
- ^ Guy Dinmore. Giulio Tremonti: A critic demands a new Bretton Woods. Financial Times (online), October 8, 2008.
- ^ Caizzi, Ivo, “Bretton Woods #2 of LaRouche and Tremonti,”
- ^ Daniel Drezner (February 24, 2005). “How Stable Is Bretton Woods 2?”.
- ^ Michael P. Dooley, David Folkerts-Landau, Peter Garber (September 2003). “An Essay on the Revived Bretton Woods System”. National Bureau of Economic Research.
- ^ Nouriel Roubini, Brad Setser (February 2005). “Will the Bretton Woods 2 Regime Unravel Soon? The Risk of a Hard Landing in 2005-2006″.
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Financial crisis of 2007–2008
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