Prepare for economic life after the demise of Bretton Woods II
The global currency regime is about to collapse and India will have to reset its policies accordingly
Developed nations ended fixed exchange rates when the successful post-World War II Bretton Woods system was abandoned in the 70s. America began to fret about the economic success of its former enemies—Japan and Germany—although it had played a big role in their economic revival. It was worried about losing its competitive edge to them. In order to achieve competitiveness, it decided to follow an accommodative monetary policy and allow inflation to rise. Real rates in America began to decline from the mid-60s onwards.