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BPEA Article

The Current and Future Role of the Dollar: How Much Symmetry?

Abstract

ON AUGUST 15, 1971, the postwar international monetary system established in 1944 at Bretton Woods was brought to an end by the United States' formal termination of an undertaking that had in fact been largely inoperative for some time: its commitment under the Articles of Agreement of the International Monetary Fund to maintain the parity of the dollar by converting dollar balances held by foreign official institutions into gold at a fixed price on demand. Roughly a year later, at the September 1972 annual meeting of the Board of Governors of the International Monetary Fund, the Secretary of the Treasury put forth a proposal for a reformed international monetary system. In place of a system in which the dollar occupied a unique position, the U.S. proposal envisaged one characterized by far greater symmetry among all currencies. Such symmetry, or legal equality of rights and responsibilitiesw, as also envisioned at Bretton Woods, but in practice the system functioned very differently indeed. A careful survey of recent development suggests that the quest for symmetry is likely to prove as chimerical today as it did thirty years ago, and that in a viable international monetary system the dollar and the United States are almost certain to continue to play special roles.

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