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Key Takeaways:

• Global monetary systems follow cycles of stability, collapse, and reset — from the gold standard to Bretton Woods, and now floating exchange rates
• The U.S. dollar remains dominant, but its strength creates imbalances: cheap imports, trade deficits, and a hollowed-out manufacturing base
• Tariffs alone can’t rebalance trade — real change would require coordinated global action to shift demand, currency alignment, and debt dynamics
• A new “Mar-a-Lago Accord” is rumored, aiming to weaken the dollar and boost U.S. exports, but echoes of past failures (like Japan post-Plaza Accord) show how difficult rebalancing really is
• Without international cooperation, even bold plans risk falling short — just as previous resets required multi-nation coordination, today’s system may resist change without shared sacrifice

Over the last 150 years, the global monetary system has gone through several resets.

Sometimes, countries worked together. And sometimes, they didn’t, and chaos came about.

But the cycle is the same. Stability → Instability → Collapse → Reset.

Here's A Brief History of Monetary Resets: 1870s to Today

Gold Standard (1870s–1914) - Countries tied their currencies directly to gold. This meant you could exchange paper money for a fixed amount of gold, keeping currency values stable. But World War I killed this game as countries needed more paper money than they had gold to back it.

Gold Exchange Standard (1920s–1930s) - After the war, countries tried a somewhat new approach. Instead of holding gold outright, they also held “reserves” in currencies that were backed by gold - like the U.S. dollar or British pound. But economic chaos (aka the Great Depression) ended this system too.

Bretton Woods System (1944–1971) – After WWII, 44 nations created a new system. Picture an upside-down pyramid: gold at the base, the dollar (pegged to gold at $35/oz) in the middle, and other currencies fixed to the dollar on top. It birthed the IMF and World Bank - but was undone in 1971 when the U.S. dropped the gold peg. Too many dollars, not enough gold.

Floating Exchange Rates (1970s–Present) - Since the “Jamaica Accord”, currencies have floated freely against one another based on supply and demand. That’s the system we still use today.

There’ve been other major milestones – like the Plaza Accord (more below) and the birth of the Euro. But through all of it, the U.S. dollar has stayed on top.

But there’s a deeper principle at play - something borrowed from physics.

I’m talking about entropy.

Entropy is the idea that systems naturally move from order to disorder unless energy is put in to maintain them. You see it everywhere:

• Ice melts.
• Leftovers spoil.
• Cars rust.

And global monetary systems are no different. Clearly, history shows us this happens at times – nothing great lasts forever.

So, is another monetary shakeup just around the corner?

It might be. And it’s worth keeping top of mind because resets like these tend to ripple across global economies and financial markets.

Let’s break down what that could look like, revisit the history, and explore what it all means for the world ahead.

Why U.S. Manufacturing Struggles: Trade, Currency & the Global System

President Trump ran on rebuilding U.S. manufacturing. It was a big reason he won the Sun Belt states.

But the reality is, you can’t just tariff your way to a trade surplus (as I outlined before in “Trump’s Tariff Policy Explained: Winners, Losers & its Global Impact”).

Why? Because the current global monetary system won’t allow it. . .

I recommend reading our older articles dissecting all this, but to give you some context, there are two main reasons:

1. Global Imbalances Don’t Add Up

For the U.S. to export more, the rest of the world needs to import (consume) more. That means they’d have to run deficits. But they don’t want to..

• What is a current account? Imagine a country's "international wallet." A current account surplus means more money is flowing into the wallet than is flowing out (exports > imports), while a current account deficit means more money is flowing out than in (imports > exports). And they always have to balance (for someone to have a surplus, someone somewhere has a deficit).

Just look at the numbers:

• The U.S. runs a massive current account deficit.
  
  
• Meanwhile, nations like China, Germany, and Japan run chronic surpluses.

Figure 1: World Bank, Dunham, March 2025

Put simply, we buy in the hundreds of billions what they don’t consume.

• For more insight into this, read our blog from a few months back in “The U.S. Dollar’s Global Dominance: Perks, Pitfalls, and the Peril of Losing It”.

Thus, for any type of U.S. manufacturing resurgence to work, this would have to completely flip.

The U.S. would have to consume less while the rest of the world would consume more. But tariffs can’t control that latter point.

Meanwhile, the U.S. can’t try to export more while everyone else is also exporting (not everyone can run a surplus at once). Thus, it would be like pushing on a string.

1. The Dollar Is Too Strong

The U.S. dollar is kept artificially stronger than it should be, making imports cheaper and exports more expensive.

Let’s say a bike made in China costs 1,000 yuan.

• If 1 USD = 10 yuan, the bike costs $100
• But if China weakens the yuan to 1 USD = 20 yuan, now it’s $50

This makes importing Chinese bikes more attractive as they cost 50% less now.

The problem? Well, it completely prices out U.S. bike makers and exporters – potentially sinking profits, spurring layoffs, and an angry community that depended on the bike business.

This matters because foreign nations have done this over the last few decades - intentionally weakening their currencies to boost exports. This has pushed the dollar up, making U.S. goods expensive abroad.

To put this into perspective, take a look at the U.S. broad dollar index – it’s risen steadily even at a time when the U.S. runs huge deficits (which should mean a weaker currency).

Figure 2: St. Louis Federal Reserve Bank, March 2025

It’s important to remember that currencies are a relative game. For one to be strong, another has to be weak. To buy a USD, you have to sell a peso, euro, yuan, etc.

The point is, as long as foreigners continue to bid up the dollar deliberately, the U.S. will struggle to export more, and imports will be cheaper.

• Note that the U.S. dollar’s strength and status as the world’s reserve currency is a double-edged sword. It keeps borrowing and imports cheap but crushes exports and hollows out American factories – I’ve detailed this more here in “Triffin’s Dilemma: Why the U.S. Dollar’s Global Role Is a Double-Edged Sword”.

Thus, without addressing these two things, tariffs would most likely not fix the underlying problem.

And that’s why there’s chatter about a new global monetary system reset.

A New Deal? Enter the Mar-a-Lago Accord

Just like previous monetary resets, America would require a full global effort to rebalance the economy.

Hence, the Mar-a-Lago Accord – named after Trump’s Florida residence – may just be it.

There’s been increasing chatter that this will be a big part of the Trump administration's agenda in the coming years¹.

Here’s the basic idea:

• The U.S. provides security guarantees and access to its massive consumer base.
  
  
• In return, the world helps weaken the dollar and buy long-term U.S. debt (like “century bonds”) – allowing the U.S. to essentially refinance its debt far longer while locking in lower borrowing costs.

How would this work?

It seems like tariffs and a U.S. sovereign wealth fund – which are both being discussed - would be the tools of choice.

• What is a sovereign wealth fund? Think of it as the U.S. government taking money it earns from things like taxes, natural resources, or investments, and instead of spending it all, it puts some aside into a big fund. That fund would then invest the money – such as stocks, real estate, companies, even other countries’ debt.
  
  
• Other countries already do this – like Norway (sitting on $1.5 trillion), Saudi Arabia, China, Singapore, etc.

Tariffs would put pressure on trade partners to start consuming more from the U.S.²

• For example, just today, the European Union announced it is weighing potential concessions to the Trump administration in hopes of securing a partial rollback of U.S. tariffs, which have already begun impacting the bloc’s exports and are scheduled to escalate further³.

Meanwhile, the wealth fund would buy foreign currencies to push the dollar down relative, boosting U.S. export competitiveness.

Figure 3: Apollo Academy

Can the Mar-a-Lago Accord work?

Sure, it could.

But there’s a catch. The plan is riddled with conflicting issues.

1. Tariffs often strengthen the dollar (not weaken it) as it disproportionately hurts any nation that exports to the U.S. (imagine if your biggest buyer just said, “Hey, we’re not going to buy from you” – it would be a huge blow to the seller).
   
   
2. It would take years to change the U.S. economy – completely uprooting supply chains and industrial capacity, causing significant short-term pain. Would that be politically palatable?
   
   
3. A weaker dollar raises the price of imports, driving up costs for consumers and businesses. This could reignite inflation, pressuring the Fed to keep interest rates higher - exactly the opposite of what the policy wants.
   
   
4. To rebalance the entire global monetary system, the world would have to be on board. But foreign cooperation here? Unlikely. China and Europe have little incentive to restructure just to help Washington.

For them to accept this, they’d have to completely restructure their economies from export-driven to consumption-driven, which is not easy.

Need proof?

Look at how Japan tried and imploded spectacularly. . .

Lessons From The Past: The Plaza Accord and Japan’s Woes

Long story short, after World War II, Japan rapidly transformed into a manufacturing powerhouse.

News outlets were riddled with the “Japanese Miracle” – how they were growing so fast they would take over the economic world.

Following the Gerschenkron growth model - aka prioritizing exports over domestic consumption – Japan ran persistent current account surpluses and fueled growth through exports.

• By the mid-1980s, Japan was the major export-driven economy. In 1984, exports made up a whopping 15% of its GDP (to put this into context, China is sitting at roughly 20% as of 2023).

But by 1985, things changed with the Plaza Accord - an agreement that Ronald Regan’s administration pushed for⁴. It aimed to weaken the U.S. dollar (which was very strong) against the Japanese yen and German mark to address trade imbalances (reduce U.S. deficits).

Why? Because a weaker dollar made U.S. goods more competitive abroad, while a stronger yen increased U.S. goods into Japan.

The result: between 1985 and 1990, the yen appreciated from 251.8 to 135.75 yen per U.S. dollar – an over 45% increase.

Figure 4: St. Louis Federal Reserve, Dunham, 2025

Because of this, Japan’s exports took a steep hit - dropping to just 9% of GDP by 1989 from 15% just five years earlier.

Meanwhile, household debt surged from 53% to 70% of GDP as import prices fell and domestic consumption rose.

These two items helped trigger Japan’s infamous economic spiral in 1991, which it has struggled with ever since.

But here’s where things get interesting. . .

After the Plaza Accord, the Japanese Prime Minister in 1986 essentially formed a ‘brain trust’ to try and change Japan’s economy from export-driven to demand-driven to match the stronger yen policy.

This birthed the Maekawa Report⁵ - led by former Bank of Japan head Haruo Maekawa – which proposed bold reforms, such as:

• Move from exports to domestic consumption.
• Boost consumer spending via government incentives.
• And use a stronger yen to lift living standards.

It was Japan’s shot at economic rebalancing - but powerful political and industrial opposition shut it down. They didn’t want to lose the perks of the export and infrastructure-driven subsidies. It also would have required a sharp slowdown period over years.

Now, decades later, Japan still faces weak consumption, sluggish growth, and chronic trade surpluses.

• PS – Germany never followed through either, instead using the newly introduced eurozone as its own dumping ground for exports - which helped push nations like Greece, Portugal, Italy, and Spain into deep deficits. And since they didn’t allow for a rebalance, the eurozone has stagnated for over a decade. We touched on this before in “Fragile by Design? Why the Euro Struggles to Rival the U.S. Dollar”.

Japan and Europe are big reminders of how difficult it is to rebalance the global monetary system – and that a single country alone can’t force it.

Final Thoughts

Please keep in mind that this isn’t about right or wrong, good or bad.

It’s just about what may be coming.

The idea behind a Mar-a-Lago Accord taps into real pain points: U.S. deindustrialization, soaring deficits, and the burden of an overly strong dollar.

But history shows that monetary resets only work with global cooperation.

In the 1980s, Japan (which was a rapidly growing economy) and West Germany were deeply reliant on U.S. military and economic support, giving the U.S. leverage to push through the Plaza Accord.

But China today? It's a different story. Facing its economic headwinds, it has far less incentive to cooperate on America’s terms.

So, will the global monetary system change? It will - one day.

But the real question is —  who benefits the most when it does?

Time will tell.

But things are getting interesting.

FAQ: The Global Monetary Reset

Q: What is a global monetary reset?
A reorganization of the global currency system—typically triggered by crisis or major imbalance.

Q: Why is the U.S. dollar’s strength a problem?
It makes U.S. exports more expensive and imports cheaper, hurting domestic industry.

Q: What was the Plaza Accord?
A 1985 agreement to devalue the dollar relative to the yen and mark, aiming to reduce U.S. trade deficits.

Q: What is the Mar-a-Lago Accord?
An informal term for a potential Trump-era initiative to reset global trade and currency imbalances.

Sources:

1. Wall Street can't stop talking about the 'Mar-a-Lago Accord.' Here's how the currency deal would work. | Morningstar
2. What Is the Mar-a-Lago Accord? - Apollo Academy
3. Trump Tariffs: EU Plans ‘Term Sheet’ of Concessions for Talks - Bloomberg
4. Plaza Accord: Definition, History, Purpose, and Its Replacement
5. The Maekawa Commission Reports and the Potential Constraints on Internationalization | SpringerLink

Disclosures:

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Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.

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