TWO months into the Trump administration and we have had more sound and fury than concrete proposals about its economic agenda. The most alarming sign so far is that America forced the G20 to drop a pledge about resisting “all forms of protectionism” from a joint statement but this may be purely symbolic.
Nevertheless, Mr Trump’s determination to shake up the status quo may yet have global consequences. In a research note, Chris Watling of Longview Economics suggests that
Trump’s policies might inadvertently bring about a new international monetary order as the administration struggles to fulfil campaign promises in the light of the original misdiagnosis of the ‘trade deficit’ problem.
The current monetary system emerged from the downfall of Bretton Woods in the 1970s. Under the Bretton Woods system, devised in part by John Maynard Keynes, currencies were fixed to the dollar (with scope for occasional devaluations or revaluations) and the dollar was fixed against gold. But this required the US to act as the anchor of the system; other central banks were…Continue reading