When the United States broke up the Bretton Woods international monetary system on Aug. 15, 1971, it marked the official end of an era when the dollar was literally "as good as gold." President Nixon's announcement -- that the U.S. would no longer permit foreign central banks to redeem U.S. dollars for gold at the established fixed rate -- shocked Japan and Europe, our main overseas trade partners.

It was the repudiation of a formal agreement hammered out some 27 years earlier at Bretton Woods, N.H., and signed by delegates from 29 participating nations. The whole purpose of the agreement -- which was initiated by the U.S. -- was to establish a stable, post-World War II monetary foundation so that free trade could flourish. Never again would nations shortsightedly cheapen their currencies to obtain an unfair advantage; the nightmare of economic warfare leading to military warfare would be ended.

Today, our trade partners are no longer shocked. They have come to expect domestically focused monetary policy from America. But they are deeply concerned by the demise of the once-dependable dollar and deeply impacted by the economic distortions caused by skewed exchange rates. They are, no doubt, deeply affronted by what they detect as the same cavalier attitude that decades earlier prompted Nixon's Treasury Secretary, John Connally, to quip to U.S. allies: "It may be our currency -- but it's your problem."

Has the U.S. forever given up on the dream of a rules-based monetary order for a global economy dedicated to free trade? Have we abandoned all sense of duty associated with providing the world's key reserve currency?

These days it's easy to forget that, during the Great Depression years leading to World War II, floating exchange rates were not considered the free-market approach to currencies. They were considered the antithesis of global monetary order. Whereas the international gold standard guaranteed a level playing field in the trade arena, facilitating market-based outcomes among well-intentioned competitors in an open global marketplace, a nation that devalued its money against gold -- i.e., floated its currency -- was considered to be cheating.