These proposals include McKinnon's case for a gold standard without gold, Mundell's proposal to target the real price of gold and the case for target exchange rate zones presented by Williamson and Bergsten.(18) Even more immediate is the move to convert the adjustable peg of the EMS to a unified currency area with irrevocably fixed exchange rates.
The Bretton Woods adjustable peg was in some respects similar to the gold standard contingent rule, but it invited speculative attack hence weakening the escape clause.
The interwar period comprises three regimes: a general floating rate system from 1919 to 1925, the gold exchange standard from 1926 to 1931 and a managed float to 1939.(25) The Bretton Woods regime cannot be characterized as a fixed exchange rate regime throughout its history: The preconvertibility period was close to the adjustable peg envisioned by its architects, and the convertible period was close to a de facto fixed dollar standard.(26) Finally, although the period since 1973 has been characterized as a floating exchange rate regime, at various times it has experienced varying degrees of management.
It collapsed both because of fatal flaws in its design (the adjustable peg in the face of improved capital mobility and the confidence problem associated with the gold dollar standard) and the lack of commitment by the United States to the gold standard convertibilty rule.
The EMS, although not based on gold, incorporated many of the features of the Bretton Woods adjustable peg system.
To prevent these ills, the case for an adjustable peg system was made by Keynes, White, Nurkse and others.(79) The new system would combine the favorable features of the fixed exchange rate gold standard--stability of exchange rates--and of the flexible exchange rate standard--monetary and fiscal independence.
Both Keynes, leading the British negotiating team at Bretton Woods, and White, leading the American team at Bretton Woods, planned an adjustable peg system to be coordinated by an international monetary agency.
Second, they revealed a basic weakness of the adjustable peg arrangement--the one-way option of speculation against parity.
In addition, the adjustable peg system evolved into a virtual fixed exchange rate system.
Another important source of strain on the system was the unworkability of the adjustable peg under increasing capital mobility.
The exchange rate mechanism of the EMS was designed as an adjustable peg exchange rate system, but its architects hoped to avoid the problems that plagued Bretton Woods.