Bretton Woods and Bitcoin – Messari Crypto

The post WWI depression era was marked by competitive currency devaluations, discriminatory trade blocs, and high tariffs which many believe exacerbated the tensions leading up to WWII.

In an attempt to resolve these issues leaders from 44 allied nations met in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference, known better as the Bretton Woods conference. At the end of three weeks the attendees emerged with a new monetary system that established the U.S. dollar as the world reserve currency.

At the time, most countries were on the gold standard. However, the U.S. held ¾ of the world’s gold meaning it was difficult for other countries to sustain their monetary base. The solution? Fix their exchange rates to the greenback. The result? The U.S. was left as the only country that could effectively print money, albeit still backed by their gold reserve redeemable at a rate of $35/oz where it remained for the next few decades.

By fixing exchange rates to the USD, it alleviated competitive devaluations to gain an edge in foreign trade. The International Monetary Fund (IMF) was also established at the conference and funded by member nations for the purpose of lending money to countries in a currency crisis.

Bretton Woods was effective at stabilizing currencies after bouts of hyperinflation experienced post WWI.

However, keeping the USD fixed to gold left a limited amount of the world reserve currency. After a few decades the U.S. felt it wasn’t adequate to service the worlds demand so they began to break the peg, eventually suspending convertibility altogether bringing us to the fiat system we know today. Even though the dollar was no longer redeemable for gold and exchange rates were free floating based on market forces, the USD remained the world reserve currency.

This brings us to the world we live in today — a paradigm of modern monetary theory employing quantitative easing and low or negative interest across the board. General distrust of our financial system has led to people looking for alternatives which can explain how a new idea like cryptocurrencies have been able to grow in such a short amount of time.

If the current trends continue, and we see cryptocurrencies reach escape velocity where world leaders seriously consider it a direct threat to their control, its not unlikely that we see another gathering of the world elite making decisions that will shape the course of the next century.

The only question is do they accept crypto or try to fight it?