Moving towards Bretton Woods II?

In Germany, Koehler, a former head of the International Monetary Fund (IMF), has called for the staging of an international conference along the lines of the one held in Bretton Woods in 1944 that helped draw up the post-war financial order. "I'd like to see a Bretton Woods II," he said when discussing what should be done to tackle the financial crisis. "I think the crisis is manageable. It's in our hands."

Germany's Foreign Minister Steinmeier says he wants to see a body comprising an expanded Group of Eight industrial nations to discuss a new financial order.

Sarkozy, the French president, met with President Bush over the weekend. They agreed to a series of summit meetings in the next few months to discuss common strategy for the global economy. Mr. Sarkozy is clearly pushing for a change in the way capitalism is practiced.

And what kind of capitalism does he believe in? The answer is a highly regulated state capitalism,most probably involving a global regulator for all international banks, including U.S.-based.

Bush has agreed to a series of summits, which will apparently start in November. No word on what the exact dates are, but they are likely to involve most developed and many developing countries.

A consensus is slowly building up among world leaders that some sort of regulatory watchdog has to be set up to ensure that one nation's financial woes do not plunge the whole world into economic chaos ever again.

The foundation of the original Bretton Woods agreement was a shared belief in capitalism. But the system collapsed in 1971 because of the US's unilateral refusal to honor convertibility of the USD to gold. The world is going to be weary this time around. And the US will have to open up its economic and fiscal policies to international scrutiny, that is for sure.