The collapse in the 1970s of the Bretton Woods system spelled the end of the gold standard. From then on, the world entered a phase of a US dollar-led global monetary system.

For a long time, the United States has run consecutive deficits in trade. In response, it has pumped a great deal of dollars into the world financial system to meet the huge demand for liquidity generated by globalized investment and trade.

However, since the eruption of the world financial crisis in 2008, the dollar has been grappling with the Triffin Dilemma, whereby additions to countries' dollar holdings undermine the very system that defines the greenback as the anchor currency.

The dollar finally has lost its equilibrium value in maintaining liquidity, stability and domination of the global monetary system.

Meanwhile, the euro, invented as a counterweight to dollar, has failed to evolve into yet another supranational anchor currency after its strength was undercut by an accelerated downward economic spiral and the EU's sovereign debt debacle.

From another perspective, what we also need to worry about is the indulgence of leading Western developed nations and regional governments in such schemes as quantitative easing (QE) to save their own financial systems and economies from disintegration.

That indulgence has led to excessive liquidity in a world economy still reeling from aftershocks of the crisis.

For instance, the recent price hikes of commodities and agricultural products, as well as asset price volatility in foreign exchange, securities, bond and futures markets based not on economic fundamentals, are signs that short-term speculation is seriously impairing the slow recovery of the world economy.

Also at stake is the growth pattern of East Asia, whose exports and outbound investment benefit a lot from the current global monetary system.

Moreover, there is a risk that the national wealth of East Asian nations in possession of vast stock of dollar and euro assets will shrink considerably.

Even if emerging markets like China make unilateral efforts to ease the pressure from imported inflation and yuan funds outstanding for foreign exchange -- a gauge of capital inflows - hot money eyeing lofty returns will flood into fast-growing countries and areas where interest rates are high and exchange rates remain stable.

Consensus-building

The consequences are that governments of the recipient countries will be forced to implement tightening measures, which are both woefully ineffective and sometimes counterproductive.

Therefore, it's urgent and meaningful to reform the management of the global monetary system at a time of dismal post-crisis economic outlook.

Although this imperative has caught many politicians, academics and business leaders off guard, rendering elusive any agreement on the coping mechanisms at the moment, there has been heated discussion and analysis of the pros and cons of various reform packages that have been put forward.

Whether the global monetary system will eventually morph into a single currency bloc, or an amalgam of competing yet supplementary major currencies; and whether any reform will consolidate the domination of the dollar, or raise the profile of emerging markets in the proposed currency reserve known as Special Drawing Rights (SPR), it's a first order of business to initiate global consensus-building and strengthen policy coordination between nations.