ABSTRACT
The new monetary order devised at Bretton Woods in 1944 was planned by men who knew only too well how far the economic chaos of the 1930s had been responsible for the holocaust of the war and how much of the havoc could have been avoided if individual nations had not followed incompatible economic policies. The success of the post-war international monetary system depended heavily on the US balance of payments deficit. America's deficit was a reflection partly on the size of her military expenditure overseas: on keeping troops in Europe and, eventually, on fighting in Vietnam. The relationship between the collapse of the old monetary system and the acceleration of inflation at the end of the 1960s is still hotly debated among economists and central bankers. Banks have in the past been profoundly wary of floating exchange rates, arguing that they do not 'discipline' countries to pursue sensible economic policies.
