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Bretton Woods – What they wont teach or tell you …

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 8, 2008

Prequel to Bretton

Keynes’ first book that gained him some following in the world of economics was the ‘Indian Currency And Finance‘. This work examined in significant detail the workings of the Indian currency system. The Indian colonial currency system was anchored to the British pound – and various other local Indian currencies were in use – and even legal tender in large parts of India.

G5 will take on G8

G5 will take on G8

Thus there was always great pressure on Britain to keep the British pound on gold standard – as there was always the option for the common citizen to use coinage from other kingdoms and princely states. In 1900, the British colonial Government tried to enforce circulation of British sovereigns in India – which failed.

Of course, gold importation into India was severely restricted. The gold blockade against India was effective as the major gold production centres were under Anglo Saxon occupation (Australia, Canada, USA, South Africa, Rhodesia, Ghana, etc.).

The Birth Of Bretton Woods

As WW2 was winding down, the Anglo Saxon Bloc went ahead and devised the Bretton Woods system. This system was a copy of the Indian currency system – where instead of the British pound, the American dollar became the Index currency.

Instead of milking only India, the Anglo Saxon Bloc could now milk the whole world. Keynes noted how America when dealing ‘her dependencies, she has herself imitated almost slavishly, India.’ So, when the time came, it took very little time for the US to scale the Indian currency model on the rest of the world.

The success of Bretton Woods-I depended on blockading India from buying gold – which was effectively done by Morarji Desai. (I wonder why the ungrateful Anglo Saxon Bloc has not made a statue of Morarji Desai at Mount Rushmore). He has after all been the single biggest contributor to their prosperity for the last 50 years.

What was Bretton Woods

The world stamped their approval on Bretton Woods.

As per the agreement, all countries of the world would use the dollar as the index currency – for international trade and foreign exchange reserves and for nominal exchange rate fixation. This system allowed the USA to print ‘excess’ dollars. These ‘excess’ initially in limited quantities, but soon at an accelerating pace. Today the USA has flooded the world (and the USA markets with more than US$50 trillion) of excess currency. The housing bubble, the M&A frenzy, the credit crisis are by products of this printing of dollars. With these excess dollars, the US consumers and others bought what they wanted – and US went ahead and printed some more dollars.

Bearing the dollars cross

Bearing the dollar's cross

Behind Bretton Woods – Gold

If the Bretton Woods system was defective, unfair, weighted et al, why was it accepted? Why did the world believe that only the Anglo-Saxon Bloc could deliver.

Why?

In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Who paid for the dollar hegemony

Who paid for the dollar hegemony

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. Anyone could (except Indians and Americans) buy an ounce of gold from the USA for US$35 – managed by the the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got (and even now) plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The Bretton Woods Twins

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries, their client states like Japan, OECD, etc. have 65% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

Bretton Woods Fraud

The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Nixon Chop And Bush Whack

From the Nixon Chop to the Bush Whack final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also the US Vice President during the 8 years of Reagan Presidency.

The bend in the flow

The bend in the flow

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

The Nixon Chop

On August 15th, 1971, President Nixon after a two day huddle with 15 advisers at Camp David, delivered the Nixon Chop to the world. The Nixon chop (my name for this event), one month after his China breakthrough, cut the convertibility peg of US$35 to gold as US gold reserves were severely depleted.

The French had been regularly redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France. This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemption by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop , itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees.

Can the dollar be fixed?
Can the dollar be fixed?

On August 15th, 1971, the world got the Nixon Chop – where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories links), gold prices were managed and brought down to US$225 per ounce – but still 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don’t see is that the Anglo Saxon bloc with 80% of the world’s gold production in a choke-hold does what it wants.

On December 31st, 1974, nearly forty years after Roosevelt nationalized private American gold stocks, Americans were allowed to invest in gold again. Again Indian liberalization (1991) of gold imports happened a good 17 years after the US laws (1974) were liberalized. I wonder, how that was tied.

And that is what has happened for the last 60 years. Of course, all good (for the Anglo-Saxon Bloc) things come to an end. And so has Bretton Woods – I & II.

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33 Responses

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  1. Galeo Rhinus said, on October 8, 2008 at 9:52 pm

    I am very curious of the events in the early 1900s.

    I remember the following from my memory (could be wrong here)
    I think there were some policy changes in gold and currency prior to 1914, that stayed in place until the Ottoman Empire was dismantled in 1924. A new system came into effect in 1924 that was again dismantled in 1938 (or 1939).

    1945 – onwards – we have it right.

    I think even some history of 1800s is of relevance.

    From what I know is that India’s primary currency was Silver (Roupya). Copper and Gold has limited circulation.

    During 1857 – a NY Times article complained about the amount of silver that India is importing.

    I think sometime in the late 1800s – silver (basically lost its status as a defacto currency) and also lost its price ratio versius Gold.

    I think it might be important to analyze some of these forgotten (or hidden) histories.

  2. Dsylexic said, on October 9, 2008 at 1:02 pm

    I just ordered this book: Evolution of the World Economy, Precious Metals and India
    to read about what you are alluding to. It has got articles by Delhi University professor,Om Prakash,so my leftist alert antenna is going to be up!
    Here is a review of the book.
    http://eh.net/bookreviews/library/0781.

    The reviewer says,”These articles show that the monetary policy behind the ‘gold standard’ was part of an Imperial system that served the interests of the City of London. The collected studies show that implementation of monetary theories, like the much praised gold standard, are inseparable from historical developments and power relations. ”
    I am sure 2ndlook would concur

    Pravin

  3. Dsylexic said, on October 9, 2008 at 2:49 pm

    I am trying to get this book Evolution of the World Economy, Precious Metals and India
    (see review:http://eh.net/bookreviews/library/0781) to study this period exactly.

    The book seems to have contributions from Delhi university professors -so my leftist alert antenna is up!

    However,the reviewer says “These articles show that the monetary policy behind the ‘gold standard’ was part of an Imperial system that served the interests of the City of London. The collected studies show that implementation of monetary theories, like the much praised gold standard, are inseparable from historical developments and power relations. ”
    -2ndlook,I would think would concur .

  4. […] Bretton Woods – What they wont teach or tell you … […]

  5. […] Bretton Woods – What they wont teach or tell you … […]

  6. […] why should India even look at IMF and World Bank – which are fig leaf organizations of the West, as transfer mechanisms of wealth from the Third World to the […]

  7. […] is an indication of this. Will the US use Paul Krugman as the Keynes of the Bretton Woods. The background of Bretton Woods itself, is of course something that the US and Europe do not want the world at large to […]

  8. […] Bretton Woods – What they wont teach or tell you … […]

  9. […] is an indication of this. Will the US use Paul Krugman as the Keynes of the Bretton Woods. The background of Bretton Woods itself, is of course, something that the US and Europe do not want the world at large to […]

  10. […] is an indication of this. Will the US use Paul Krugman as the Keynes of the Bretton Woods. The background of Bretton Woods itself, is of course something that the US and Europe do not want the world at large to know. The other […]

  11. […] Roosevelt had earlier in 1933, during his New Deal years, nationalized all gold. This restriction was finally eased only on December 31st, 1974, with Executive Order 11825 by Gerald Ford. It was Roosevelt’s gold nationalization which allowed the US to wage WW2 and create the Bretton Woods system. […]

  12. […] last time, we saw this, it was called the Bretton Woods. The US and the Anglo Saxon Bloc came together and said we will administer the new world currency […]

  13. […] The post laid out the position of the world economic structures and developments in the last few years, rather well – and the way Bretton Woods unravelled. […]

  14. […] why should India even look at IMF and World Bank – which are fig leaf organizations of the West, as transfer mechanisms of wealth from the Third World to the […]

  15. […] And the nationalization of gold also impoverished the Americans. Nationalization of gold enabled the US Governments to enter costly wars like WW2, Vietnam War, and now the Iraq and Afghan Wars. This allowed to US to walk into the WW2 with 25,000 tons of gold – and impose Bretton Woods on the world. […]

  16. […] – especially its contribution to: – One, the greatest crime wave ever in human history.; Two – the survival of Bretton Woods for 25 […]

  17. […] national industry today is prostitution. Britain is floating on the sewage of the Bretton Woods bilge! After the multi-trillion dollar bailout, which has just begun, and with more than US$4 trillion […]

  18. […] national industry today is prostitution. Britain is floating on the sewage of the Bretton Woods bilge! After the multi-trillion dollar bailout, which has just begun, and with more than US$4 trillion […]

  19. […] – for funding, respect, status, support, foreign Universities, using paper money, backed by the Bretton Woods fraud, will impose their ideas, culture, etc in […]

  20. […] you should consider the following, before you make such a sweeping statement. With the declining power and use of the dollar, the US is fighting a losing battle against agricultural subsidies. The US depends on less than […]

  21. […] technology, lower productivity has a cost edge over his European an American counterparts. With the declining power and use of the dollar, the US is fighting a losing battle against agricultural subsidies. The US depends on less than […]

  22. […] of British GDP today is declining North Sea oil and British Petroleum. Apart from Chinese money, the other source of liquidity which keeps the US afloat is petro dollars.And the US future is so closely linked to Arctic […]

  23. […] been governed by a financial system that has been a failure – the Bretton Woods Agreement, a millstone around the developing world. As WW2 came to a close, British-American economists came together and devised this system. The […]

  24. […] and the dominant Anglo Saxon Bloc allow this? If this shape of India emerged, what would happen to the Bretton Woods architecture? Britain obviously did not wish to midwife a country of these dimensions – especially, since […]

  25. […] of British GDP today is declining North Sea oil and British Petroleum. Apart from Chinese money, the other source of liquidity, which keeps the US afloat is petro-dollars. And, remember, US future is so closely linked to […]

  26. […] with (or even if  you are worried about the economic consequences of) the US foreign policy should go out and buy gold. This will surely trigger a collapse of the US dollar. Just a 100,000 people buying a 100gm of of […]

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  31. S.Suchindranath Aiyer said, on May 19, 2012 at 4:58 pm

    Bretton Woods: another example of Britain’s Greece to America’s Rome?:

  32. Familienbande 2. Teil said, on August 27, 2012 at 9:43 pm

    […] weiteren großen Teil des weltweiten Goldvermögens einverleiben. Danach lockerte man für das Bretton-Woods-System den Goldstandart wieder etwas auf, da man den Dollar ja nun offiziell dem Gold gegenüber […]

  33. admin said, on March 17, 2013 at 11:13 am


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