Whatever the final goal, the establishment of an SDR-denominated substitution account for existing stocks of official reserves, as recently suggested, may be worth of further consideration as a means to smooth the transition. In this context it may be instructive to recall how we got here. The original Bretton Woods system, as designed by its founders, rested on tight capital account controls.
The gradual liberalisation of capital movements helped to exacerbate the tensions within the system, but their roots were deeper. While the system had been designed as a regime of “fixed but adjustable” parities, in actual practice the peripheral countries – both those in deficit and those in surplus – resisted parity realignments, making the system much more rigid.