It is a rather difficult problem. Can one absolute value be assigned to a currency? Will this currency reflect what appears on the ground? What can be learn from having one fixed value? In 1949, Britain devalued the pound sterling by 30%. This was a major world economic event given that the pound was and still is one of the major currencies in the world. In fact, 9 other countries followed suit then to devalue by a similar margin. They were Australia, India, South Africa, New Zealand, Eire, Denmark, Norway, Egypt, and Israel. The question id did Norway, India, Eire, Denmark need to devalue by 30 percent as if they had the same economic strength and financial muscle as Britain? The effect of the devaluation was bound to be more serve on the economies of Norway, Denmark etc which also appears to be happening between EU states today with the size of the German economy against other smaller EU states. Then again as you said so rightly to go back to the gold standard. But can one value system rule the world economy? If it is so then what happens to purchasing power? Tax structures vary between countries and any tax above 8.3 percent recycles the government budget within its set time frame a calender year. Much like Keynesian economics government collects the budget, spends it, recollects it, spends it again etc. At each cycle government eats up more leaving less for you and me. So when we look at one US dollar of yesteryear it buys less than it does today. Yes a Gold Standard would preserve value provided governments can keep that value and control it's level of taxation. It's a double edged sword. This is the crisis the European Exchange Rate Mechao (ERM) faced between July and August when speculators drove the ERM down that resulted in the collapse of the Maastricht Treaty. The remedy saw EU finance ministers increase their float rate margins by 15 percent either side of the D mark the ERM anchor currency from two and a quarter percent. This was in response to some EU nations overshooting set budget targets. The UK got ejected from the system but all the other currencies maintained their numerical value but all floated downwards as it in effect was a 30 percent depreciation. The problem of a Gold Standard is that national development programs get constraint.The nature of increased float rates have brought back past dilemmas faced by international currencies and trade as noted in the 1960s and 1949 and 1931 with trade and budget deficits. In fact the Bretton Wood crisis saw the Sterling depreciation against the US dollar not exceed 7 percent from the time the floating started up to the middle of October, but reached more than 11 percent at the beginning of November 1972. (Bank of Zambia (1972) p.1). Behind all this the United Kingdom in the 1960s experienced a worsening trade balance, while as far back as 1958 some Western European countries also started to acquire gold instead of US dollars and the United States lost US$2.3 billion. The outflow of gold continued. At the beginning of the 1950s, the value of American gold stock amounted to US$25 billion. By 1968 it had sunk to US$10 billion. (Bo Sodersten (1960) p.454).

Empirical findings in the late 1980s suggest that the move by industrial countries to floating exchange rates, following the collapse of the Bretton Wood fixed exchange rate system, had some effect in reducing the level and the rate of growth of international trade. (Bank of Botswana (1996) p.54).

The increasing depreciation rate or float rate of the US dollar means US dollar global liquidity is increasing. The US dollar will always face the Triffin Dilemma as long as one value is assigned to it across all markets disregard less of size.It was the Interim Committee of the Board of Governors of the IMF’s fifth meeting held in Jamaica in January 1976 that set to resolve the on going 1960 Bretton Wood crisis, which in the past also plagued the Gold Standard.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments.

‘In the face of increasing financial strain, the system collapsed in 1971, after the United States unilaterally terminated convertibility of the dollars to gold.

It is here that the Jamaica meeting was set to reconstruct a new system of rules and management involving the future of global trade.

Here the IMF Board of Governors’ fifth meeting “set the seal on the Second Amendment of the IMF articles that limited reforms to those areas on which consensus had been reached [in an attempt to correct the crisis.] But on the central aspect of reform-the exchange rate regime, convertibility of official balances and the reserve system-the Jamaica agreement virtually accepts the fait accompli that had followed the breakdown of the Bretton Wood system.”

The Jamaica reforms basically outlined a believed path out of the Triffin Dilemma that was responsible for global crises.

The answer to the Triffin Dilemma that the global economic and financial universe faced was, “continuing with the prevailing situation with the role of the US dollar reduced, with an increased role for other currencies and private financial markets, and with all governments trying to reduce their exposure to exogenous events; or moving in the direction of regional monetary blocs, which would each work out their own relations with other monetary areas; or advancing to a better-organized world system”.

For Africa under the Jamaica reforms, the monetary blocs such as the African Union (AU) have been formed but its focus is on commodities, while the Europe has formed the European Union (EU).

Yet with the EU hit by the 2008 crisis, huge geographical monetary blocs are not immune to the global melt down. Hence the interpretation of monetary blocs within the mandate of the Jamaica Reforms basically falls on each national currency participating in global trade and establishing exchange rates driven by currency markets and trade with its trading partners is paramount, rather than the geographical interpretation of monetary blocs being associated to continents.

Alongside this, the Jamaica reforms encouraged the creation of super economic blocs so strong that they would withstand any economic or financial shocks experienced in the 1970s.

Consequently, the move towards regional blocs saw the European Economic Community (EEC) accelerate its formation into the European Union and its Euro as a move away from the US dollar, and the US moved to create the North America Free Trade Area (NAFTA), while for Africa, the Organization for African Unity (OAU) was transformed into the African Union (AU).

For the AU, the Fund prescribed that it would work it its own relations with other monetary blocs, which has seen Africa sign the Lome Convention and South Africa a trade deal with the EU.

However, after the 2008 US Sub-prime crisis the financial collapse of the EU’s Euro and the US economy has brought into question the Jamaica reforms effectiveness.

After 2008, stimulus measures taken to resuscitate major economies have disintegrated into Quantitative Easing Policies (QEP) marked with accelerated float rates and the printing of money which basically has brought back discarded and discredited economic management ideologies in the 1970s into the 22nd century lime light of economic management.

Attitudes supporting such policies as QEP are historical as noted in the 29th Annual Report of the Bank of International Settlements (BIS), that

“the fact that such a considerable proportion of the total volume of liquidity consists of liabilities of the United States and the United Kingdom implies that the working system of international payments depends at present to a large extent on the pursuit by those countries of economic and monetary policies aimed at maintaining the purchasing power of their monetary units, and so preserving confidence, both at home and abroad, in their currencies.

If in the future-as is greatly hoped-further expansions of trade take place, the volume of international monetary reserves may have to be adjusted to the increasing need of means of payment. The problem then may arise on deciding what will be the best ways of effecting such an adjustment. This is a technical problem that monetary authorities will have to consider in good time.” (29th Annual Report of BIS pp.243-4 cited in Tew (1967) p.188)



Currently, the best way of effecting the adjustment has witnessed the global exchange rate policy shift from; the Gold Standard, to fixed exchange rates, to a floating exchange rate in the 1970s, to after the 2008 US Sub-prime crisis to Quantitative Easing Policies (QEP).

It is at this juncture that the supply and demand doctrine coupled with its free market forces appears to have failed, after so religiously being followed for over three decades, as the foundation of sound economic and financial management.