As I noted last week, clashes over how to adjust external imbalances have recurred roughly every two decades since the 1980s. I should have added the 1920s and the 1960s. The latter ended with the collapse of the Bretton Woods system of fixed but adjustable exchange rates and, ultimately, with a world of floating rates (except in the Eurozone). The former ended with a global economic depression and a world war and so, among other things, with the creation of the Bretton Woods system in 1944. One of its products was the birth of the IMF, whose job it is to help manage such imbalances today.
Why is the management of global balance of payments imbalances both so difficult and so important? The short answer is that they lie at the intersection of almost everything that matters in global economics and politics: national power, full employment, industrial strength, financial stability, fiscal and monetary policies and management of exchange rates. In sum, they shape a large part of international relations.