The current decade is sometimes referred as Bretton Woods II (BW II) mainly because in both the system, American Currency, Dollar has been used as medium of exploitation for economic gains by the countries. The Bretton Woods I System had redefined the international finance and…
In the contemporary times, the situation has somewhat changed in the favour of emerging new economies like Japan, Korea, China etc. who manage their currencies relative to US Dollar and have consistently diverted their surplus to the US through export. The developing economies, at the same time, have considerably increased their forex reserves to keep an edge in the new transformed global business environment. Since the role of emerging new economies is seemingly like that of Europe, when Bretton Woods I system was initiated, the current system is called Bretton Woods II system.
Triffin Dilemma seems to have reappeared in the current global economy of recessive trend only to some extent. Triffin Dilemma primarily refers to Robert Triffin’s contentions that Bretton Woods I would not offer long term economic stability because its inner ‘workings contained contradictions… The Triffin Dilemma posited that the world therefore confronted a choice between running short of liquidity and undermining confidence in the dollar, which was destined sooner or later to produce a crisis (Triffin, 1960). Indeed, his prophecy had come true and Bretton Woods I system crashed eventually.
In the recent years, the American Economy has undergone a rapid downfall and the increasing US Account deficit has devalued the dollar to the extent that it has generated new concern in the international trade arena. Though it seems quite probable that Triffin’s Dilemma can reappear in the current global economic situation in the near future but the recovery in the American economy have forestalled the speculations. The emerging new dynamics of oil and globalization give further credence to the stability of Bretton Woods II system
The main similarity between the two systems is that both have pegged their exchange rates of their currencies against the US dollar which had greatly facilitated export for the countries in Europe, when BW I was adopted and now the ...
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