"In early September 1941, John Maynard Keynes, the British economist, retreated to his country house to try to think. The U.K. was at war with Germany, and bombs were falling on London with devastating monotony. But Keynes was trying to think about peace, not war. Hitler had already come up with a plan for how he would restructure the world economy under the Third Reich, raising the question: What would the Allies do if they won?
The short answer was: No one really knew. There was no plan. But there were urgent reasons to come up with one. The conventional wisdom was that the economic mess following World War I had helped to bring about World War II. So how would the Allies keep history from repeating itself?
There in his study, Keynes was attempting to map out a pathway to lasting peace. What he emerged with, six days later, was perhaps the single most daring proposal in modern economics.
For years, this document was ignored and overlooked, the radical ideas inside it abandoned. But now, in 2025, some of Keynes's theories are being combed over once again. And in a turn of events that would doubtless have surprised a determinedly liberal intellectual like Keynes, the man who could help bring them to reality is none other than Donald Trump.
There is a long and knotty thread that connects the document written by Keynes in 1941 with today's discussions about a so-called "Mar-a-Lago Accord" -- the much-hyped plan to weaken the U.S. dollar as a way to help reindustrialize America.
Where Keynes and Trump converge is over the one big, overarching problem that now plagues the world economy: imbalance.
These imbalances manifest in all kinds of ways. The most visible is the fact that the U.S. imports cheap goods from around the world and pays for them with an unending stream of IOUs, mostly in the form of Treasury bonds. To put it in technical terms, the U.S. has a large current-account deficit: It sucks in far more stuff from overseas than it sends out. China, and to a lesser extent Europe, have large current-account surpluses.
Unlike President Trump, the vast majority of economists see these deficits as essentially benign -- a function in part of the differences in savings and investment between nations. And, most economists would add, the U.S. has actually done perfectly well, in net terms, in its trade with China.
But look beneath the surface and those persistent imbalances have left deep scars. In particular, as manufacturing shifted to China, so too did jobs. Old industrial regions -- many of them, coincidentally, in swing states in presidential elections -- have been hollowed out. That successive presidents have pledged to rebuild American manufacturing is in part a symptom of these imbalances.
The broad contours of this system have been with us for so long they might feel like a natural state of affairs, but there is nothing natural about countries having mammoth surpluses and deficits and -- this is the really important bit -- having them for so long. Over time, these imbalances really ought to, well, balance. Currencies and wages should adjust, making it more attractive to make stuff in America; China should begin to consume more and import more.
This hasn't happened. But imagine there were some sort of system, or set of institutions, that could help redress these imbalances, encouraging countries with large deficits to reduce them -- and, arguably even more important, encouraging those with surpluses to do likewise. That brings us back to Keynes and that document he wrote in 1941, "Proposals for an International Currency Union."
At the heart of it was a premise that feels pretty compelling these days: Left to its own devices, the global economy is utterly terrible at moderating these imbalances. Keynes was living out the consequences. In the 1930s, after the collapse of the gold standard -- in which countries tied the value of their currencies to the price of gold -- the international monetary system spiraled into chaos, leading to trade imbalances, protectionism and currency wars. The Nazi party had risen from the economic wreckage.
Keynes came up with a solution he called the "Clearing Union." It would work a little like a regular bank, which allows indebted customers to borrow money through overdraft facilities -- at a cost. Keynes's Clearing Union attempted to apply the same principle to international economic relations.
There would be an international central bank, the Clearing Union, with its own currency, "bancor." Every country would have its own individual account at the Union, denominated in bancor, and countries would use these accounts whenever there was trade between them. If country A sold bananas to country B, a debit would be made in country B's account and a credit would be posted to country A's account. This would all be invisible to the banana-seller, who would trade in local currency.
Countries that relied on imported goods would eventually find themselves with a large overdraft at the Clearing Union, and interest charges would be imposed to encourage them to bring their trade back into balance. The more unusual feature of Keynes's proposal is that penalties would also be imposed on countries with large credits at the Clearing Union, to incentivize them to import more and export less.
The whole point of the scheme was that it was symmetrical. Countries with big surpluses, like China today, would have just as much of an incentive to adjust as those with deficits. In theory, the world economy would never have to face the kinds of imbalances it faces today.
What happened to this radical plan? The short answer is: America killed it. During World War II, the U.S. was an export powerhouse, with the biggest trade surplus in the world -- not all that different in balance-of-payments terms from China today. So in the run-up to Bretton Woods, the 1944 conference that determined the postwar monetary system, the American delegation squashed Keynes's Clearing Union plan. The fact that his scheme also relied on the creation of an international currency was the final straw. Then as now, no one much liked the idea of a global currency.
What the world got instead was the Bretton Woods system, a revamped version of the gold standard. Rather than fixing every country's currency to gold, Bretton Woods fixed currencies to the dollar, which in turn would be fixed to gold. In short, if there was going to be a global currency, that currency would have to be the dollar. This system would be monitored and regulated by the International Monetary Fund, which was a sort of global bank, albeit nothing like the one Keynes had in mind.
For a while at least, Bretton Woods worked surprisingly well. Between the late 1940s and the early 1960s, trade imbalances were far smaller than before or since. But then, under the fiscal pressures of the Vietnam War and an ever more expensive welfare state in the 1960s, the imbalances began to swell. The system began to crack.
It was put out of its misery by Richard Nixon, who abruptly ended Bretton Woods in 1971, severing the link between the dollar and gold. Instead, countries' currencies would float against each other: the dollar would not be worth a certain amount of gold, but whatever investors thought it should be worth.
In a sense, Nixon's decision lit the fuse that landed us where we are today. Imbalances were allowed to grow, as were international flows of capital. In the meantime, the U.S. swung from running a large trade surplus to a large trade deficit. China, admitted into the World Trade Organization in 2000, surged to become the world's biggest exporter.
Since there is no global currency and, except for gold, no obvious place to put your money when all else fails, the dollar routinely found itself at the heart of this international monetary dysfunction. Every so often the dollar would strengthen to intolerable levels, and since a stronger dollar makes it harder for U.S. exporters to compete with their cheaper foreign counterparts, the deindustrialization of America accelerated.
Which brings us to the idea of a Mar-a-Lago Accord, most famously dangled late last year in a paper by Stephen Miran, now chair of Donald Trump's Council of Economic Advisers. The Trump administration, like many of its predecessors, sees the strong dollar as an obstacle to bringing manufacturing back to the U.S.
Miran argued that new American tariffs would incentivize other countries to sign up for access to a U.S. trade zone. As part of this deal, they would agree to intervene in currency markets to reduce the value of the dollar. They might also swap some of their existing U.S. Treasurys for much longer-dated versions, with the Federal Reserve providing short-term liquidity as needed. Such a dollar-depreciating accord, Miran wrote, would help to create manufacturing jobs in America and reallocate aggregate demand from the rest of the world to the U.S.
Since being appointed, however, Miran seems to have gone cold on the idea, saying recently that the administration isn't actively considering it. Perhaps that is because Treasury officials have gently pointed out that forcing other nations to accept U.S. bonds that might never be repaid is effectively a default. (After this story was published online, a White House spokesperson told the Journal that "neither Miran nor the administration have ever gone hot on the idea in the first place.")
Nonetheless, his ideas have captured the attention of many in the international economic community -- not so much because they have a chance of success but because they provide some economic scaffolding for Trump's trade policy. If you believe in the Mar-a-Lago Accord, tariffs suddenly seem to have a deeper purpose: They are there to confront the imbalances in the global economy, something economists have been grappling with since Keynes.
Regardless of the accord itself, it's clear that the administration is devoting ever more attention to these imbalances. Far from shutting down the Bretton Woods institutions, as some in the administration have pushed for, Treasury Secretary Scott Bessent endorsed the IMF's continued existence last week, though adding frostily that it must "call out countries like China that have pursued globally distortive policies and opaque currency practices for many decades."
Others outside the White House think it could and should go even further. Michael Pettis, a highly respected financial historian based in Beijing, has advocated for reconsidering Keynes's plan. The U.S., he says, should push for a set of trade agreements compelling each signatory to keep its imbalances low. If a country's trade imbalances rise beyond a certain point, other countries could penalize it with tariffs. The result would be a customs union a little like the one proposed by Keynes, albeit without the international currency "bancor," which is still a nonstarter.
"What I like about treating Mar-a-Lago as a new Bretton Woods is that then we can focus instead on the trade surpluses," says Pettis. "That's the main issue here. Keynes's point was that there are a thousand different ways you can cheat at trade, pushing up your current-account surplus. So let's just focus on the results."
Talking about trade imbalances is one thing. Doing something about them is quite another. Even if the U.S. were to get its trading partners to sign an accord, it would still have to deal with other, more stubborn issues at home. At the top of that list is the ballooning national debt. Arguably, the single best way to stifle domestic demand, and hence reduce imports, is to cut government borrowing by raising taxes or curtailing spending. But is the Trump administration ready for that?
All the same, in one sense the idea of a Mar-a-Lago Accord has already achieved its purpose. The dollar has weakened, though not in a good way. It has fallen in tandem with share prices and bond prices -- a triple decline with two possible interpretations, neither of which is encouraging. The first is that everyone thinks a recession, or something like it, is on the way. The second is that investors are pulling their money out of the dollar and looking for anywhere else to put it.
It's still too early to say which interpretation is more true. In the coming months we'll see whether the dollar rebounds (quite likely), and whether President Trump follows his flurry of tariffs with a more considered set of policies aimed at restoring balance to global capital markets. The great irony is that Trump might already have triggered a monumental shift in the international monetary system, not through an accord but essentially by mistake.
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Ed Conway is the economics editor of the news channel Sky News in the U.K. and the author, most recently, of "Material World: The Six Raw Materials That Shape Modern Civilization."” [1]
1. REVIEW --- Trump Is Right About Trade Imbalances. Does He Know How To Fix Them? --- The great economist John Maynard Keynes once proposed an international system to eliminate trade surpluses and deficits. Now the 'Mar-a-Lago Accord' aims to bring that idea to life. Conway, Ed. Wall Street Journal, Eastern edition; New York, N.Y.. 03 May 2025: C1.
