RTFA: http://money.cnn.com/2008/11/15/news/economy/g20_m…

Remembering Bretton Woods

With the crisis showing no signs of abating, several leaders have been trying to advance an agenda for the talks, which some observers have referred to as “Bretton Woods II” – a nod to a similar global economic summit held in July 1944 to reverse some of the painful trade and foreign exchange policies enacted in the wake of the Great Depression.

There have been calls, for example, to create a global accounting standard to replace the current mark-to-market standard, which some have blamed for the billions of dollars of losses suffered by banks.

Credit rating agencies and hedge funds have also become a target. French President Nicholas Sarkozy, who has embraced a hard-line approach toward regulation, has publicly said he is in favor of greater oversight of both industries.

And there has also been speculation that additional countries could enact economic stimulus packages of their own in the wake of the talks.

One underlying fear that President Bush attempted to address in recent days, including in an op-ed piece he wrote in Saturday’s edition of The Wall Street Journal, is rising protectionism.

There is concern that some countries could levy harsh tariffs on imports to prop up their ailing economies, or that some governments could try to restrict capital flows, which spelled disaster for many emerging economies as the crisis gained momentum.

But what is expected to remain front and center is the subject of regulation and how to best modernize the global financial system for the 21st century.

One approach could involve granting greater powers to the Financial Stability Forum, which represents central bankers and regulators, or the International Monetary Fund, which has played a large role in recent weeks helping to bail out struggling countries.

From CNN, a brief introduction to the meetings today.

…a continuation of the RTFA Bretton Woods II Series.

RTFA: http://en.wikipedia.org/wiki/Bretton_Woods_system

The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world’s major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.

Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF). These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value-plus or minus one percent-in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States’ suspension of convertibility from dollars to gold. This created the unique situation whereby the United States dollar became the “reserve currency” for the nation-states which had signed the agreement.

FYI: The original Bretton Woods, according to Wikipedia.