Bretton Woods -- Past, Present and Future

The Mount Washington Hotel is in Carroll, N.H. (It is not the hotel featured in the Jack Nicholson movie The Shining; that was the Timberline Lodge near Mount Hood, Ore. So it's OK to stay in rooms 215 and 217 (or is it 415 and 417?).) Mount Washington's golf club -- the course was designed by Donald Ross -- has enshrined the locker used by Babe Ruth on his visits there. Because it's near the Bretton Woods ski area, the conference of Allied world leaders held toward the end of World War II at the hotel was called the Bretton Woods Conference -- a much better name than the Mount Washington Resort Conference.

The conference was held in July 1944. The war was still raging. The D-Day Normandy invasion of Europe had happened barely a month before and the tide of war had changed, but the outcome was not yet assured. The 44 countries that attended had been victims of unenlightened monetary and fiscal policies in the 1930s and had come to realize that international cooperation was necessary. Repeated currency devaluations to increase the competitiveness of exports had led to corresponding actions by other nations and only worsened deflationary spirals. In a sense, WWII was an economic savior as demand for goods was met by labor shortages and inflation fears broke the deflationary mindset.

But few, if any, believed the conditions that spawned the Depression were gone, so at the behest of the U.S. and Britain, who had been talking and planning for a few years, the conference to figure a postwar economic agenda was held.

The conferees decided on a fixed exchange rate for currencies pegged to gold, with the only currency worth anything after the devastation of the war -- the dollar -- as the "reserve" currency. In reality, the conferees knew the only country that had an industrial base capable of pulling the world back from the precipice was the United States. The rest of the world was in ruins.

The organizations that became known as the International Monetary Fund and the World Bank were created. And it all more or less worked until the world outgrew the supply of gold and the U.S. went off the gold standard in 1971.

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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.

Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.