Bretton Woods Agreement of 1944, was touted as great
success for the global economic reconstruction after the devastation of WWII.
But there were misgivings. France
silently and Soviet Union vocally objected to the content & purpose of it. Both
saw through the hidden agenda.
Soviet Union got out blaming the creation of two
institutions i.e. the International monetary Fund (IMF) & the World Bank as
‘two sisters of Bretton
Woods’ purportedly acting as branches of the Wall Street of New York.
France was inside but started peeing into the agreement by adopting measures to
counter its effectiveness.
General De Gaulle went on to call Bretton woods as ‘America’s exorbitant privilege’
of benefiting from the rest of others. He did not stop at that and went on to
buy gold rather than stocking a cache of US Dollars.
America’s hidden agenda consists of a number of
vectors, chief amongst these is the idea of being the Number One in geoeconomics. At the time of
conclusion of WWII even America was going through hard times yet it had in its
possession more than two thirds of global gold at Ford Knox. That led to near
monopoly in gold holdings and the ability to let dollar be converted to gold.
This alone made US$ an indispensable currency. France & Britain failed to
get this privilege to their respective currencies Franc & Sterling.
By promoting US$ as a trading currency with guaranteed of convertibility to gold USA speeded up the printing & circulating US$ currencies at an alarming rate. Most countries especially in the Global South were baited to dispense with Franc & Sterling and opt for US$ as significant trading currency. Moreover, they were motivated to have their reserves in US Dollars parked not only in USA banks but elsewhere in the European continent.
The impression created by USA that ‘Dollar is as good as Gold’
induced further demand for US$ as
trading currency and to a great extent as reserve currency leading to a
situation where one cannot do without the Dollar in one’s day to day life.
Consequently, in order to meet up with the global demand not to mention domestic
demand for US Dollars, the US authorities decided to keep running the Dollar
printing machinery without any halt.
At one point there
has to be time for reckoning. US government found that they do not have sufficient
gold if and when there is a dollar run over the convertibility to gold. President Nixon instructed Treasury Secretary
John Connelly to initially suspend and later abandon Dollar’s convertibility to
gold. Finally the hidden agenda of America was thrown out and led to the demise
of Bretton Woods.
Sic transit Gloria mundi was seen in its entire manifestation as concept of Dollar convertibility to gold was dusted along with the fixed exchange system that ensured financial stability. Many countries that pegged their currencies to the US$ suddenly found them in deep mire of geoeconomics troubles. To top it all Bretton Woods Agreement walked into the sunset!
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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