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Post Event Summary
Since the end of the gold-based fixed exchange rate system in 1971 and the transition to a floating exchange rate system, severe banking and monetary crises have plagued the world almost nonstop. The current post-Bretton Woods system has created some peaceful financial periods, such as the Great Moderation in the United States, but the current account imbalances created by the system are alarming and can be disastrous. Thursday at AEI, a panel of economic experts gathered to discuss the current monetary system and how to improve it.

Robert Aliber from the University of Chicago traced the characteristics of these recurring imbalances that lead to financial shocks and demonstrated that the floating exchange rate system fails to achieve the ends promoted by Milton Friedman and others in the 1960s and ’70s. Anne Kruger, former first deputy managing director of the International Monetary Fund, picked up where Aliber’s history left off and examined the failures of the multilateral monetary system and the massive capital flow problems created by its perverse incentives. AEI’s Desmond Lachman then argued that international participants can choose only two of three options: free trade, free capital flows and floating exchange rates. If all three are employed, the system will suffer crisis-inducing imbalances. AEI’s John Makin concluded by pointing out that the system, for all its flaws, is better today than it was in the past, given the level of international cooperation to combat major financial problems, a sharp contrast to Aliber’s and Kruger’s pessimism.

Event Description
In the aftermath of the Great Recession and the ongoing debt crisis, all countries want cheaper currencies to promote export growth. This has prompted Brazilian Finance Minister Guido Mantega to sound the alarm about the dangers of a global “currency war.” The current system of floating fiat currencies, which followed the collapse of the Bretton Woods agreements in 1971, is now four decades old and has been marked by recurring financial crises and extreme exchange rate volatility. The euro is an attempt to go in the opposite direction, with a fixed exchange rate for a large region, but is itself in crisis. Can the current post-Bretton Woods international monetary system prevent a return to the beggar-thy-neighbor policies and competitive devaluations that so harmed international prosperity in the 1930s? What are the system’s flaws? Can they be corrected, and if so, how? An expert panel will address these and related issues.


1:45 PM

2:00 PM
ROBERT ALIBER, University of Chicago (emeritus)
ANNE KRUGER, Johns Hopkins University


4:00 PM

Event Contact Information

For more information, please contact Steffanie Hawkins at [email protected] or 202.419.5212.

Media Contact Information

For media inquiries, please contact Véronique Rodman at [email protected], 202.862.4871.

Speaker Biographies

Robert Aliber is a professor emeritus at the University of Chicago. From 1965 to 2004, he was a professor of international economics and finance. Before joining the Chicago faculty, he was senior economic adviser for the Agency for International Development at the Department of State. Mr. Aliber was the Houblon-Norman Fellow at the Bank of England in 1996. He was the JPMorgan Prize Fellow at the American Academy in Berlin in 2003 and a visiting scholar at the Woodrow Wilson Center for International Scholars in Washington in 2004. Mr. Aliber has been a visiting scholar at the Federal Reserve Bank of San Francisco and a consultant to the World Bank, the International Monetary Fund and various think tanks in Washington and London. Mr. Aliber has written extensively about international financial issues, including changes in cross-border capital flows, changes in currency values, and the efficiency of the currency market. His publications include “The New International Money Game, 7th ed.” (2011), “The Multinational Paradigm” (1991), and the 5th and 6th editions of “Manias, Panics, and Crashes” (2011).

Anne Krueger is a professor of international economics at the School for Advanced International Studies at Johns Hopkins University. She is a senior fellow of the Stanford Center for International Development (of which she was the founding director) and is the Herald L. and Caroline Ritch Emeritus Professor of Sciences and Humanities in the Economics Department at Stanford University. She was the first deputy managing director of the International Monetary Fund from 2001 to 2006. Before that, she taught at Stanford and Duke Universities. From 1982 to 1986, she was vice president of economics and research at the World Bank and earlier was a professor of economics at the University of Minnesota. Ms. Krueger is a distinguished fellow and past president of the American Economic Association; a senior research fellow of the National Bureau of Economic Research; and a member of the National Academy of Sciences, the American Academy of Arts and Sciences, the Econometric Society, and the American Philosophical Society. She has published extensively on economic development, international trade and finance and economic policy reform. In addition to her writings on these topics, she has written a number of books and articles on economic growth, international trade and economic policy in India, South Korea and Turkey.

Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund’s (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues and the multilateral lending agencies.

John H. Makin is a former consultant to the U.S. Treasury Department, the Congressional Budget Office and the International Monetary Fund. He specializes in international finance and financial markets (stock, bonds, and currencies including the euro and the U.S. dollar). He also researches the U.S. economy (including monetary policy and tax and budget issues), the Japanese economy and European economies. He is the author of numerous books and articles on financial, monetary and fiscal policy. Mr. Makin writes AEI’s monthly Economic Outlook.

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