Bankruptcy of Our Nation (Revised and Expanded). Jerry Robinson

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      Chapter 3

      The Rise and Fall of the

      Golden Permission Slip

      Gold still represents the ultimate form of payment in the world.

      — Alan Greenspan, Testimony before U.S. House Banking Committee, May 1999

      “The silver is Mine, and the gold is Mine,” says the Lord of hosts.

      — Haggai 2:8

      OVERVIEW: The entire global economic order was shattered after the devastation of World War II. Re-establishing economic stability was of vital concern to global leaders. A plan for restoring order to the international economic community came at a historic conference held in July 1944 in the state of New Hampshire. More commonly known as the Bretton Woods conference, the meeting created a new global fixed exchange rate regime with a gold-backed U.S. dollar playing a central role. This is the story of the rise and fall of this “dollars for gold” system.

      The “Economic” D-Day of 1944

      When historians write about the year 1944, it is often dominated with references to the tragedies and triumphs of World War II. And while 1944 was truly a pivotal year in one of history’s most devastating conflicts of all time, it was also a significant year for the international economic system. With Europe in shambles, and Britain on the proverbial “ropes,” global leaders resolved to restore confidence and order to the financial markets. Creating viable solutions to fix the global economic instability would require international cooperation.

      In July 1944, the United Nations Monetary and Financial Conference (more commonly known as the Bretton Woods conference) was held at the Mount Washington hotel in Bretton Woods, New Hampshire, with 730 delegates from 44 Allied nations attending. The express purpose of the historic gathering was to regulate the war-torn international economic system. Among other things, this would require determining a replacement of the British currency for the purposes of settling international transactions. Due to the sizeable gold reserves held by the United States, the attendees were keenly aware that the dollar was the only currency that could potentially replace the role of the now weakened British pound. The participants agreed to a new currency arrangement, known as a fixed exchange rate regime, with the U.S. dollar playing a central role. Under this new arrangement, which economists commonly refer to as the Bretton Woods system, the U.S. dollar would be linked to gold at a pre-determined fixed rate of $35 per ounce. In turn, all other currencies were then pegged to the dollar, as it was viewed as being as “good as gold.” This immediate convertibility from U.S. dollars into a fixed amount of gold brought much-needed economic relief and helped to restore confidence in the global financial markets.

      Quick Fact

      In addition to establishing the U.S. dollar as the global reserve currency, this historic conference also initiated a number of new government institutions, including:

      • The World Bank

      • The International Monetary Fund (IMF)

      • The World Trade Organization (originally called the General Agreement on Trades and Tariffs, or GATT)

      As the nation entrusted with the issuance the global reserve currency, the United States emerged as the lone economic victor in the post–World War II era. In fact, one senior official at the Bank of England described the deal reached at Bretton Woods as “the greatest blow to Britain next to the war.” Why? The Bretton Woods system provided immense power to the СКАЧАТЬ