The changing international monetary system

The international monetary system has changed significantly since the beginning of the 2010s. From the 1990s to 2013, it took the form of what was known as “Bretton Woods 2”: it was dominated by the relationship between the United States (which provided the world with the dominant risk-free debt) and China (which financed the US external deficit). Since 2013, the international monetary system has changed considerably: it is no longer China, but Europe and emerging countries other than China and oil-exporting countries that are financing the US external deficit; and the relationship with the United States is no longer cooperative. International capital flows are decreasingly capital flows relating to risk-free bonds and increasingly capital flows relating to equities. The “new" international monetary system remains inefficient: the world’s excess savings are transferred to the United States at the expense of growth in emerging countries and Europe; capital flows are not consistent with the various regions’ demographic situations. The question for the future is whether the international monetary system will undergo significant change in the form of a decline in the dollar’s reserve currency role under the effect of the “Triffin paradox”. Such a development would result from a fall in political, economic and financial confidence in the United States, with confidence acquiring new characteristics given the role of international equity capital flows; and from the determination of emerging countries and Europe to retain their savings to finance their investments. It would go hand in hand with an increase in the international role of the euro, although probably not other currencies .