ABSTRACT
This chapter begins with a quick survey of the systems which developed in the past, and then turns to a more detailed analysis of how the system has worked in practice in the years. Throughout, particular attention will be paid to the international roles played by national currencies, and particularly the evolution of the dollar. Legend has it that prior to 1914 the international monetary system was based purely on gold and internal economic adjustment. Countries supposedly adjusted their internal economies rapidly in response to gold flows, deflating to boost their trade surpluses and inflating to reduce them. By that time, however, the international use of national currencies had also become important. World War I drastically altered the international monetary system. The passage of the postwar monetary system through its four phases can best be explained through the changes which took place in the relationships among the three groups of countries just described.
