Did ECB’s Trichet Fire The First Salvo For A Possible Overhaul Of The Global Monetary Standard?

In last week’s Has The Global Banking Stress Been a Manifestation of Declining Confidence In The Paper Money System?, we noted, ```As a final note, don’t forget that historical experiments over paper money have repeatedly flunked. We don’t know if this is signifies as 1) a mere jolt to the system or 2) the start of the end of the Paper money system or 3) the critical mass that would spur a major shift in the present form of monetary standard.”

Today, we read of ECB President Jean Trichet suggesting for a return to the ``Bretton Woods” discipline, this from the Bloomberg,

``European Central Bank President Jean- Claude Trichet said officials reshaping the world's financial system should try to return to the ``discipline'' that governed markets in the decades after World War II.

``Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline,'' Trichet said after giving a speech at the Economic Club of New York yesterday. ``It's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline.'' (emphasis mine)

So what is the essence of the Bretton Woods standard?

According to Wikipedia.org, ``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 strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. This created the unique situation whereby the United States Dollar became the "reserve currency" for the Nations who signed.”

If the movement to reform our monetary standard gains ground, these could possibly posit 2 significant changes:

1) a possible return to the quasi gold standard (most likely a modified version) where paper money will be fixed to gold and/or

2) the end of the US dollar as the reserve currency.

Interesting times.