Bombing For Bucks (part one)
The U.S. Dollar – An Elephant In The Room
By the beginning of World War Two, The United States was poised to dominate the world economy through the sheer weight of its industrial expertise, its innovative engineering and its then vast supply of natural resources. All of these factors, along with its ability to develop those natural resources and employ them in the manufacture of consumer products made the U.S. a natural-born world leader.
During the conflict itself, the United States, when it finally entered the war late in 1941, supplied Europe with war materiel, agricultural products and manufactured goods. In payment for these things, it demanded gold, thus accumulating significant amounts of the precious metal. U.S. citizens themselves could not obtain gold from their government in return for paper dollars, nor could any other private holder of U.S. paper currency. But other countries were – in theory – allowed to do so. The latter decision was made at a conference held in a New Hampshire
Hotel in the township of “Bretton Woods” in the first half of July 1944.
The Bretton Woods Agreement was eventually reached and 44 countries signed on the dotted line. Most of the world’s advanced nations, headed by the United States, agreed to a system of monetary rules, under which national currencies were tied to the value of gold bullion.
Let’s bear in mind that a significant share of the world’s
gold was being buried at Fort Knox. That fact, combined with the country’s industrial capacity and political influence, made the United States the “de facto” world leader and the U.S. Dollar, the world’s so-called reserve currency.
The Bretton Woods Conference also provided for the establishment of “international” monetary bodies, including The International Monetary Fund (IMF) and what eventually became The World Bank Group. The word “international” was virtually moot, however, because The United States held the preponderance of influence within these bodies; the U.S. Dollar became the world’s “reserve currency” of choice.
The system actually worked for a time.
But eventually, the United States over-extended itself. The over-extension went by the name of war and the name of the war was Vietnam. The American foreign trade deficit grew.
By the late 1960’s it was becoming apparent to America’s allies that the U.S. deficit might well balloon out of control and some countries worried that they might not be able to cash in the huge dollar reserves they had accumulated. In 1970, there arose a demand by certain governments for the redemption of large amounts of their reserves of U.S. dollars. U.S. authorities panicked, fearing the disappearance of the nation’s gold reserves.
American congressional and administration leaders feared a form of bankruptcy. U.S. authorities knew full well that if foreign governments attempted to redeem too many dollars, the United States would be forced into default because it would not be able to make good on its obligations.
Today, the U.S. dollar is once again in crisis.
