With World War Two still raging across Europe, the Pacific and the Far East, the fledging United Nations monetary and financial conference met at Bretton Woods in New Hampshire in the first three weeks of July 1944.
The world economy had been devastated by the 1929 Wall Street Crash, the 1930s Great Depression and the war itself.
Millions of people were refugees, many more millions were unemployed and homeless, food shortages were everywhere and money, in some parts of the world, wasn’t worth the paper it was written on.
A total of 730 delegates from all 44 Allied countries attended the conference at the Mount Washington Hotel where they signed the Bretton Woods Agreement which ushered in the post-way boom and the relative economic stability the advanced capitalist world has enjoyed for the past 64 years.
The main planks of the agreement were: the British pound sterling gave way to the US dollar which became the world’s reserve currency; the gold standard was abolished and the dollar’s exchange rate with gold was fixed at $25 an ounce; the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (now the World Bank) were established.
Signatories agreed to peg their currencies to the US dollar underlining its new role as the world trading currency. It was a root and branch victory for President Harry Truman, Washington and Wall Street over the “ancient regimes” of Europe and laid the basis for the post-war economic hegemony of the United States.
Today the US dollar is not simply on the ropes, it’s on the mat, slugged by a US government debt amounting to $US10 trillion.
It is incapable of continuing to fund the wars in Iraq and Afghanistan and, at home, it cannot bail out the corrupted, over-leveraged, chronically inflated financial system centred on Wall Street.
Against this background, it is laughable that US Treasury Secretary Henry “Hank” Paulson has decided to host an emergency conference of G20 finance ministers from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain, the US and the European Union in Washington this weekend.
Paulson, the former chairman and CEO of Goldman Sachs, and the finance ministers in attendance have all individually and collectively contributed to the creation of what the IMF describes as the worst economic slump since the 1930s.
So far, their response has been to rob taxpayers in the greatest shift in wealth from the public sector to the private sector ever seen. Apart from grand larceny, described in the financial press as “bail outs” and “partial nationalization”, not one of the G20 participants has come up with an idea to halt the now meltdown on money, share, property, energy and commodity markets.
When British economist John Maynard Keynes attended the 1944 Bretton Woods conference he proposed the establishment of a world central bank and the creation of a world reserve currency which he called the Bancor.
Perhaps it’s time the old dreamer’s ideas were re-floated. Certainly, a Bretton Woods Agreement Mark II is the only possible way to tackle today’s global crisis. Is there a world leader with the authority or the vision to host it?