Rob Preece - 11 November 2008

GORDON BROWN hailed Barack Obama’s election victory as a “dawn of hope” last night as he urged the United States to join Europe in building a new world order.

The Prime Minister used his annual foreign policy address to the City of London to call on fellow world leaders to “seize the moment” and lay foundations for the “first truly global society”.

He also reiterated the need for governments to inject more funds into their economies and resist the temptation to retreat into protectionism and isolationism in the face of the economic downturn.

Addressing the Lord Mayor of London’s banquet at the Guildhall, he said: “Just days ago, across the Atlantic, our closest ally gave new meaning to its founding creed that all are created equal; gave new strength to the notion that the American dream is for all Americans.

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J.D. Seagraves - Oct 20, 2008

On October 13, British Prime Minister Gordon Brown called for a new-world financial order. “We must create a new international financial architecture for the global age,” Brown said. “We must have a new Bretton Woods.”

Brown’s statement echoed the sentiments of French and EU president Nicolas Sarkozy, who on September 26 said, “We must rethink the financial system from scratch, as at Bretton Woods.”

So is a new “Bretton Woods” a good idea? Before we can answer that question, we need to take a look at the original Bretton Woods System, which was the world’s first fully negotiated international monetary order. What inspired global leaders to create it, and what ultimately led to its demise?

The Monetary Role of Gold

By 1900, most Western European nations had evolved from centrally planned monarchies to pseudo-capitalist republics. This resulted in the heyday of the International Gold Standard, in which market economies of the West engaged in relatively free trade, facilitated by the ultimate global currency of gold.

Gold, according to Austrian economist Carl Menger, emerged as money millennia ago. In fact, gold’s monetary nature predates the existence of the nation-state. It is “real money” in the sense that no one has to be forced to accept it: they do so willingly. And thus, gold presents a problem for nation-state governments—they can’t manipulate it as easily as paper money.

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