New Delhi, Feb. 24 -- On India's Independence Day of 1971, US president Richard Nixon announced to the world that America was unhitching from the gold standard.

This unilateral action spelt the end of the 1944-instituted Bretton Woods system, which had been set up in the wake of World War II to stabilize international finance and encourage global trade. It worked by pegging the dollar to gold as part of an international system of fixed exchange rates with all settlements in dollars. This served very well for a couple of decades. The world saw high economic and trade growth with relatively low inflation. The dollar enjoyed hegemony since all trade invoicing was in dollars.

But there was a price to pay for that hegemony. The US ran a wide...