17 - THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM

Abstract

This chapter presents the evolution of the international monetary system. Throughout most of the 19th century, international trade and commerce were carried on by the leading trading nations within a regime of fixed exchange rates that resulted from the use of an international gold standard. Although the international monetary system of the 19th century is often regarded with nostalgia by those who yearn for a return to a simpler past, its so-called golden age was comparatively brief. While precise dating is difficult, it appears to have functioned very well in the last two decades of the 19th century and the first 13 years of the 20th century, until the advent of World War I. Throughout most of the post-World War II period, the course of the international monetary system was tied to developments in the United States and its balance-of-payments position. It was the seeming uncontrollability of the United States balance-of-payments deficit that brought an end to the international monetary system forged at Bretton Woods in 1944.