|
||
Bretton Woods II
The Mount Washington Hotel is in Carroll, New Hampshire. It is not the hotel featured in the Jack Nicholson movie "The Shining." That was the Timberline Lodge near Mount Hood, Oregon. So it's ok to stay in rooms 215 and 217 (or is it 415 and 417 ?) The hotel's golf club- the course was designed by Donald Ross- has enshrined the locker used by Babe Ruth on his visits there. Because it's near the Bretton Woods ski area, the conference of Allied world leaders held towards the end of World War II at the hotel was called the Bretton Woods Conference. That is a much better name than Mount Washington Resort Conference.
The conference was held in July of 1944. The war was still raging. The D-day Normandy invasion of Europe was barely a month old and the tide of war had changed, but the outcome was not yet assured. The 44 countries that attended had been victims of unenlightened monetary and fiscal policies in the 1930's and had come to realize international cooperation was necessary. Repeated currency devaluations to increase the competitiveness of exports had led to corresponding actions by other nations and only worsened deflationary spirals. In a sense, WW II was an economic savior as demand for goods was met by labor shortages and inflation fears broke the deflationary mindset.
But few, if any, believed the conditions that spawned the Depression were gone, so at the behest of the U.S. and Britain who had been talking and planning for a few years, the conference to figure a post war economic agenda was held.
The conferees decided on a fixed exchange rate for currencies pegged to gold, with the only currency worth anything after the devastation of the war, the dollar, as the "reserve" currency. In reality, the conferees knew the only country that had an industrial base capable of pulling the world back from the precipice was the United States. The rest of the world was in ruins.
The organizations that became known as the International Monetary Fund and the World Bank were created. And it all more or less worked until the world outgrew the supply of gold and the U.S went off the gold standard in 1971.
There is to be a new "Bretton Woods II" conference in Washington, D.C. starting November 15. The underlying truth about the world economy that led to BW I is still true today. The U.S. economy is still the largest and most powerful economy in the world. A crisis in the U.S. is a worldwide crisis. The dollar, and only the dollar, has a large enough global presence and a measure of trust (although that trust has been damaged) to be used as the "reserve" currency for the world. It was not until Fed Chairman Bernanke made unlimited dollar loans to the Central Banks of the world that the international chaos started to subside.
Much has been written that this conference is to pave the way for the U.S. to be supplanted as the global economic leader. That is not what the goal will be. The European Central bank helps steady the financial system of its members. But it lacks the authority to regulate banks, lacks taxing power, and has no central political voice. Like it or not (and many do not like it), the U.S. economy and dollar will be the forces to stabilize the financial mess.
Some European leaders think there should be new universal regulatory powers. That is not going to happen if for no other reason than the U.S. is in between Presidential administrations. If President-elect Obama has the sense that he appears to have he will stay away and not be subject to international maneuvering before he even takes office. And, no one nation is going to cede regulatory oversight of its financial institutions to another.
Hopefully, a long term agenda for regulatory cooperation and communication can be set with the next meeting's agenda decided upon. Far better to talk then not, but no real decisions will come out of this meeting. There will be gnashing of teeth and venting of rage at the mess that excess securitization has created, and the international regulation of and accounting for such derivatives will probably be a focus.
Interestingly, the Mount Washington Hotel failed and was taken over by the FDIC in 1990 during the Savings and Loan bailout. Having been built for $1.2 million in 1902, it was auctioned for $3 million in 1991 and is thriving today. Maybe that's a story line that the world can follow.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
With all due respect, Vince, I think you're full o' beans . . .
Let's look at what you are saying from a purely-European perspective. Or, one might say, "purely non-American." Let's think for a moment like a businessman who does not live in this country.
The reason why Breton Woods I "worked," indeed the ONLY reason, is because America was AT THAT TIME the only truly-independent industrial economy left in the world. Its currency was, at that time, "as good as gold." The rest of the businessmen in the rest of the world were grateful to have the fortunate chance to grab hold of that.
But...
In the sixty years since that time, the United States not only betrayed that trust, but sought to quite-literally SWINDLE those businessmen. In this oh-so-brief amount of time, America went straight from "one dollar is 1/32 of an ounce of pure gold" to a present-day system that manufactures more than 1 million "dollars," quite-literally "out of thin air," each and every MINUTE. If you don't imagine that such shenanigans have very-real consequences, "just ask Iceland."
Okay, so... "the United States Dollar is really NOT an option anymore." Even though the United States is the host country ("thank you for the free drinks and the oh-so fluffy pillows"), its government's own willing actions make THIS potential resolution quite impossible.
Did anyone pick up on the statement "And it all more or less worked until the world outgrew the supply of gold and the U.S went off the gold standard in 1971." ? Outgrew the supply of Gold??? Give me a break! We are not all simpletons out here. The fact is the Banksters issued "Gold Certificates" and "Federal Reserve Notes" redeemable in gold when they did not have the gold to back them up! They committed acts of fraud by doing so and then blamed gold! The currencies were devalued because the banksters and political hacks refused to live within their means and wanted to spend more than the people would allow in taxes. So they broke the law and committed acts of fraud by printing paper "currency" that claimed to be redeemable when in fact they did not have the metal to back up the "notes". In essence they wrote hot checks! All this crap we are dealing with today is caused by the Federal Reserve Banksters and their supporters. The current fiat debt based "money" system is just an elaborate Ponzie scheme and it will end the same way no matter what they do to try to keep it going.
The whole thing is one colossal fraud.
" The current fiat debt based "money" system is just an elaborate Ponzie scheme and it will end the same way no matter what they do to try to keep it going."
As it turns out, civilization is still experimenting with money. There are currently a lof of speculative abuses of the game of capitalizm, but going back to some government owned "fixed" amount of money is certainly not the answer (unless you are a flat lander). If you have some solution you should state it. The fed is not going to change, a large number of people rely on 401k plans, and farmers who borrow credit from their local bank, yes it amounts to a "debt" owed by the farmer, to plant next springs crop are going to continue with the system the way it is. If you study the subject, the American version is the envy of the world. Money is not a ponzi scheme. Inflation may devalue money, but that emanates from liberal fed policy. The money is borrowed at the bank, the commercial bank level, and it (money...in credit form) happens to be the domain of demand by the public, you and me. It sound to me like you guys want the Polish satelite system of the Soviet era (correct me if I am wrong). Their money was not expandable as bank loans, i.e. bank credits.
I think that it's fair to simply say that, "you cannot 'manufacture' money." Money is, and it must remain, a UNIT of trade. As in, "a unit of measure (of something that is otherwise already and nevertheless going on)."
The United States Government erred in precisely the same way that the Wiemar Republic did, and for more-or-less the same very-human reasons: because they did not have the ability to make "the desired outcome" occur in real life, they nevertheless had (and so, exercised) the power to make this outcome occur "on paper." They printed millions and millions of Marks... but succeeded in making only the purveyors of paper and printing-ink happy. Since no one in a forest was willing to get off his duff and chop down a tree and cut it into pieces and deliver it into town for what he knew damn well was "only paper," no one in the town had stove-fuel. And the man in the forest did without milk, because the farmer in town who ALSO knew damn well it was "only paper" milked his cows and dumped the fluid into the nearest creek. And so it went.
The bottom line is: "money can NEVER substitute for real TRADE." And, "real trade" can never be "purely multi-national, i.e. at the expense of DOMESTIC activity."
We have been aware for quite awhile that China manipulates its currency to keep it cheap to the dollar and therefor provide an avid market for its production. We say nothing official about this even though it is a violation of the WTO. This distorts the market valuations and violates the game of capitalism at its fundamentals. Yet not a single Republican says anything.
We have watched as the "carry trade" violates the fundamentals that would otherwise exist for a fair market determination of foreign exchange values amongst currency rates. We do nothing because there is no law that is violated, yet we know that more money is "stolen" from the system than the sum total of all bank robberies in the history of time. (ugghh)
We watch as OPEC intervenes to manipulte the price of oil, yet our government does nothing to punish them. If we are so intent about punishing Iran by trade sanction, how about Saudi Arabia and all the other dictatorial sheikdoms? Could it be that as long as they use the dollar we are ok with their behavior??? Why should Japan have to use $US dollars to purchase oil?
It is time for the US dollar to cease being the reserve currency because it gives the US a free trip. It is time to margin out of existance foreign exchange speculation. etc etc.
You do realize that if dollar loses its reserve currency status we will be effectively a bankrupt country, no longer able to print dollars to pay for our imported oil! With all of the advantages of reserve currency on our side the people that make real decisions in our economy have managed to bring us to this current ruin. How is that possible without accepting the fact that what they had been doing is what brought us here and it must be in some way wrong? Now, they want us to just continue believing the same old tired globalist "free market" crap. "Free marketeers" and unregulated market cultists are just another set of Utopians just like communists were, except more dangerous. For them the bright future is always just around the corner! They cannot accept the fact that they are wrong; the patient is dying but their solution is always more of the same medicine - poison. Enriching one class of people to the detriment of the rest is not exactly the recipe for the long term success of a commonwealth like ours. This evil system is so entrenched and so blinded by its own propaganda that I doubt it is able to reform itself in a controlled manner.
I think we are all in for an economics lesson over the next 10 years. I do not believe it will be production economics, but monetary economics. I remember reading of De Gaulle being indignant about the seiniorage taken by the use of American currency.
I read this anecdote in the Economist circa 1978: The englishman goes to Taihita on vacation in 1936. Writes checks for everything on his bank in England. He returns home and the checks never clear his bank account. In 1968 he returns on vacation to Taihita and has dinner one night, pays with an Am Xpress travelers check. His change includes a check he had written some 32 years earlier, stamped "payable to bearer". Question: who paid for the Englishman's vacation? We Americans have been having a lot of free lunches and most all of us a oblivious to it.
The point is that the dollar will, eventually, lose its status as the worlds reserve currency. If not this bubble, then the next, or the next. Everyone is assuming these criminal hacks and their supply-side voodoo is dead. Don't be so sure. The US economy is currently about 25% of the world economy. When the US economy is 5% of the world economy (not so far off), believe me, austerity measures will come into play. Has anyone noticed that the "official" debt is currently $10 trillion? That alone is more than 2/3 of the entire US economy! The real debt with all of the costs the tricky accountants haven't included is somewhere between 13 and 15 trillion. You do the math. Go look back at New Zealand in 80's and 90's. Look at what their debt/GDP ratio was. Look at what the world's monetary gurus forced upon that country. The US is still the big dog so this country will get away with more, but boy is there a big crash coming one day, and nobody seems to care.
If I were a businessman in any other country, I would see "reserve currency" as a none-too-concealed code word for "deliberate fraud." Against ME and MY FAMILY.
And I would have not one thing to do with it.
Multiply "me" by 50 million people similarly situated, and guess what: you have "a country."
This time around the world is not in ruins. Judging by our crumbling infrastructure we look closer to ruins than Europe or Japan does. Dollar may indeed survive as the reserve currency but only because there isn't a better alternative. I suspect the majority of the world would prefer a different solution. This is not exactly the solid foundation to build on the new Bretton Woods. Also, it is worth remembering that British Pound retained much of its status during post WWII dollar's ascendancy.
Oddly enough... the infrastructure that you speak of is largely INTACT. It has been idled for less than 50 years. Less than a generation. Dust it off and oil it up and update some of the oldest machinery and "We Can Do It!"
Ahem, for the record [per "The Shining" reference] that would be room #237.
On the surface a Bretton Woods II seems like a good idea--and could be a tremendous event--but having read a brief article on Gordon Borwn's most recent statement on the subject, I do have some questions.
Brown referred to needed IMF/World Bank reforms--but just what exactly is he talking about? I agree completely that the IMF/World Bank need profound reforms...but as with terrorists and freedom fighters, one man's reform might well be seen as further economic malfeasance, particularly if such reform were to strengthen IMF/World Bank authority and means in forcing developing countries to accept Chicago doctrine economics and the inevitable insistence on economic restructuring.
If a Bretton Woods II would lay the groundwork for a new global synthesis of Keynesian & Innovative [alternate energy] encomics, I believe the global economy might well be embarking on a progressive and far more stable economic path.
But if any aspect of free market fundamentalism is reinforced or substantially strengthened in a way that allows the IMF/World Bank to subject developing and/or poor, debt-ridden countries to forced economic restructuring, then we will be preparing to allow the very "snake oil" economic policies that brought us to the current crisis to define our economic future.
You must be logged in to comment. Log in or connect with
