The cost of America's free lunch

As long as exchange rates were fixed under the Bretton Woods system, the nature of that privilege was clear: the US was the only country that could freely determine its own monetary policy. All others had to adapt to the policy dictated by the US.

This changed with the advent of floating exchange rates in the early 1970's, which allowed more stability-conscious countries, such as Germany, to decouple from a US monetary policy that they considered too inflationary.