[Arne]

Originally Posted by mcsluggo

The US did rather well during "that period" (I assume he means Bretton Woods) not because there was a gold standard, but because there was an explicit DOLLAR standard. The Dollar was the only currency ostensibly pegged to gold... all other currencies were explicitly pegged to the dollar. ALL other currencies. THat is a sweet position to be in. We, and we alone, had full guaranteed currency stability. Any imbalances were upon the rest of the world to adjust, whether they were caused by us or them. THis gave us (and us alone) full monetary policy effectiveness while simultaneusly guaranteeing a stable exchange rate and allowing the flow of capital. Not anybody else, though.

Its a good gig if you can get it. However, the discipline not to abuse the position has to be fully internal, and we were definately NOT able to maintain that good discipline. Bretton Woods collapsed when the rest of the world got tired of having to import OUR inflation, without any of the benefits of an expansionary monetary policy (we were able to get ALL of the benefits, while exporting most of the costs abroad). Inflation didn't kick in here until the collapse of Bretton Woods, under Nixon.

Lets see if the rest of the world is interested in handing the US this sort of power and influence these days... 1945 (the start of Bretton Woods was quite a bit different. Ours was the only really functioning economy AND our attitude to our obligations to the rest of the world were COMPLETELY different. A US government dedicated to the Marshal Plan while simultaneusly maintaing fiscal and monetary discilpline for the whole world (while ALSO paying down our WWII deficits) .... well, lets just say that sort of discilpline is not apparent in US government today.

Maybe the chinese will let us all hich our wagins to the yuan....?

He meant prior to 1913. I said prior to the Fed... The Fed certainly wasn't founded in Bretton Woods.