After Coronavirus ‘War,’ Bretton Woods-Style Shakeup Could Dethrone the Dollar

For governments, fighting the coronavirus pandemic is like fighting a war.

The leaders of Italy, Spain and Germany have used the analogy – along with the CEOs of Bank of America and the U.S. telecommunications giant AT&T – to describe the mass-scale efforts needed to combat the disease: mobilizations of the healthcare industry, a retooling by factories to produce masks and makeshift morgues to accommodate a fast-rising death count.

During a televised press conference this week, U.S. President Donald Trump characterized himself as a “wartime president.”

Now, it’s becoming clearer that the economic toll of the virus, as in a war, is likely to be dire. In the U.S. alone, a record 3.3 million jobless claims were filed last week. Deutsche Bank predicts the country’s job losses might exceed 15 million, with Europe approaching a similar level. Countries are prepping aid and stimulus packages into the trillions of dollars, stretching already heavily indebted government balance sheets. Central banks led by the Federal Reserve have pledged nearly unlimited support to financial markets. Investors have flown to safety in U.S. dollars, and in doing so driven down emerging-market currencies, inflicting additional economic damage on some of the world’s poorest countries.

So with officials starting to envision what it might take to rebuild damaged economies and restore society to a semblance of normalcy, speculation is mounting that seismic shifts might be in the offing for the global monetary system — a phenomenon that historically has occurred in the wake of world wars.

Think Bretton Woods, the historic gathering in 1944 at a mountaintop resort in New Hampshire, which set the template for the current system and entrenched the dollar’s near-century-long reign as the world’s dominant currency.

“I wouldn’t rule out anything at this point,” says Markus Brunnermeier, a Princeton University economics professor who has advised the International Monetary…

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