Glossary
Plain-language definitions for terms you'll encounter in geopolitics and international economics.
Bretton Woods 2.0
An informal label for the post-1971 international monetary system, in which the original Bretton Woods regime of fixed exchange rates tied to gold-convertible dollars was replaced by floating exchange rates with the US dollar as de facto reserve currency. Economists Michael Dooley, David Folkerts-Landau, and Peter Garber coined the Bretton Woods 2.0 term in 2003 to describe the post-2000 pattern in which East Asian central banks accumulated dollar reserves to manage their currencies against the dollar, effectively recreating a quasi-fixed exchange regime through reserve management rather than treaty. The Bretton Woods 2.0 framing helped explain how the US could sustain large current account deficits for decades — the deficit was being financed by surplus countries' reserve accumulation. The 2014-2024 erosion of this pattern, as China and other surplus economies diversified reserves, suggests Bretton Woods 2.0 is gradually unwinding without a clear successor regime.
Bretton Woods system
The international monetary order designed at the July 1944 conference in Bretton Woods, New Hampshire, and in force from 1946 until 15 August 1971. Member currencies were pegged to the US dollar within a narrow band; the dollar in turn was convertible into gold at $35 per ounce for foreign central banks. The IMF and the World Bank were created to backstop balance-of-payments deficits and finance post-war reconstruction. Barry Eichengreen, in *Globalizing Capital* (1996, revised editions through 2019), traces how the system worked while US gold reserves and dollar liabilities were in rough balance, and broke when persistent US current-account deficits made the gold convertibility commitment incredible. President Nixon closed the gold window on 15 August 1971, ending fixed parities by 1973. What replaced Bretton Woods was a hybrid: floating exchange rates among the major economies, the dollar still functioning as the dominant reserve and invoicing currency, and the IMF reoriented towards crisis lending rather than parity defence. The currency-regime articles on this site treat that post-1971 order as the live system, with Bretton Woods 2.0 as one informal label for it.
Impossible trinity (trilemma)
A country cannot have all three at the same time: a fixed exchange rate, free movement of capital across its borders, and an independent monetary policy. It can have any two. Robert Mundell set out the underlying logic in 1963, and Maurice Obstfeld and Alan Taylor later formalised it as the policy 'trilemma' that every open economy faces. The classical gold standard chose fixed rates plus capital mobility, and gave up policy autonomy. The post-1971 floating regime gives up the fixed rate to keep policy independence with open capital accounts. China for decades chose policy autonomy plus a managed peg, and used capital controls to square the circle. The trilemma is one of the few genuinely ironclad results in international finance — every monetary regime is an answer to which of the three a country is willing to sacrifice. The dollar's reserve role and the local-currency settlement debate on this site both sit inside this frame.
Petrodollar
Dollars earned by oil-exporting countries from their petroleum sales, typically recycled back into US Treasury securities, real estate, or other dollar assets. The arrangement underpinned dollar dominance for decades after the 1971 collapse of Bretton Woods.
Reserve currency
A currency held in significant quantities by central banks and treasuries to back their own currency, settle international debts, and intervene in foreign exchange markets. The US dollar is the dominant reserve currency; the euro, yen, and pound are also widely held.