Celebrating the 75th anniversary of the Bretton Woods conference is probably not high on the list of priorities for cryptocurrency enthusiasts this month. This is an understandable oversight – the price swings, confusing product launches and whereabouts of Justin Sun are perhaps more compelling.
But the birth of international economic cooperation and interoperability should be recognized as the beginning of a process of economic reconstruction that has contributed to the global imbalances worrying the markets today. It could also have set the scene for the solution.
The bulk of the U.S. stock market may be overvalued, and yields look set to go even lower – but a large part of the current strain lurks under the surface of the currency market. A combination of monetary easing, trade tensions and the threat of military action in the Middle East is a noxious cocktail for currency holders and hedgers as international conversions get risky and costly.
Perhaps because of this, as well as the disquieting brandishing of financial muscle by the U.S. administration, the chorus of questions about the role of the U.S. dollar as a global reserve currency is getting louder.
What’s more, it has held its leadership role for almost 100 years; the average global reserve currency lifespan over the past five centuries is 95 years. Shifting balances are hinting that the dollar’s reign may soon be up: its share of foreign exchange reserves is over 60%, while the weight of the U.S. economy in global output has fallen to less than 25 percent and is likely to continue trending lower.
