What Does “A New Bretton Woods Moment” Mean?
Seismic shifts are unfolding which will significantly impact our economic future.
The International Monetary Fund recently announced their intention to fundamentally re-design the global financial structure. Specifically they called for “A New Bretton Woods Moment”. A statement like this carries major implications for all nations and investors are wondering how this restructuring will take place and what it means for international markets.
If we don’t understand the past, then we struggle to comprehend the present. In this article we will look back to the first Bretton Woods “moment” and search for clues as to how the IMF’s plans may impact the future value of gold.
The call for “A New Bretton Woods Moment” was made by the International Monetary Fund (IMF) Managing Director, Kristalina Georgieva and has far reaching implications. The vast majority of the world’s population is too young to remember the foundation of the Bretton Woods System but it is important to note that this event also created the IMF itself. With the IMF calling for a new historical economic system we are guaranteed that a seismic shift is about to take place.
The Bretton Woods System was agreed upon towards the end of World War II by 44 nations. The System got its name because the 1944 meeting was held in Bretton Woods, New Hampshire. During the three weeks of the conference the attendees agreed upon the structure of monetary policy and defined the future financial relationships between the signatory nations. This was the first time in history a negotiated monetary order was created to govern financial policies between independent states.
The Bretton Woods System created an obligation for the signatory countries to maintain their external exchange rates within 1% by tying their currencies to gold. The IMF was created to bridge any temporary imbalances in this global exchange system. In 1944 the United States controlled the majority of the world’s gold reserves and demanded that the US dollar be used as the currency of exchange between countries. This was the foundation of the US dollar as the world’s reserve currency.
It is worth noting that the economist John Maynard Keynes did not believe the world’s monetary system should be tied to a national currency and had previously proposed a supranational currency known as the Bancor to act as the unit of account for international exchange. The Soviet delegation to Bretton Woods refused to ratify the agreement, criticising the new institutions as “branches of Wall Street.” The system came into operation during 1945 after a significant number of countries had ratified the agreement.
The Bretton Woods System stipulated that international trade would be conducted in US dollars because the dollar would be based on gold. That changed in 1971 when President Nixon ended the convertibility of US dollars into gold. It is because of this historical association between the Bretton Woods System and a “gold standard” that some observers are predicting that talk of “A New Bretton Woods Moment” potentially indicates a move back to a gold standard.
The US dollar has been completely devalued over the last century through inflation. Inflation occurs when the central bank prints fiat money and issues it into the economy. As the volume of currency in circulation increases it erodes the purchasing power of all the existing currency in circulation. Inflation is effectively a hidden tax on people’s savings. This system favors the large banks and institutions who receive the new currency first because they are able to spend that money before the effects of inflation are realised by the rest of the economy.
Some observers believe that through the mechanism of inflation the purchasing power of the US dollar has been devalued by 96% since the inauguration of the private Federal Reserve Bank in 1913. This means that one US dollar today would only have the purchasing power of 4 cents back in 1913. Because the US dollar has been used as the world’s reserve currency since Bretton Woods the entire world has lost through US dollar inflation. Given that almost all the value of the US dollar has been stolen in this manner it makes sense that the world’s financial elite are calling for a new system.
The IMF is touting this “New Bretton Woods Moment” as a way to address a number of issues such as climate change, financial inequality and the economic effects of the global shutdown. It is unlikely that this announcement is fortuitously taking place in conjunction with the World Economic Forum’s call for a “Great Reset” and a global discussion of Central Bank Digital Currencies. The world’s economic elite are preparing us for massive changes and it is likely that those changes will represent the increased financial control and surveillance of our population.
It is impossible to predict how these changes will manifest and what effects they will have on our economies. What we can say is that there will be increasing centralization in our financial systems. When these changes are enacted there will be very few opportunities to opt out of these centralized systems.
Cryptocurrencies and precious metals are some of the very few asset classes that offer us freedom from the impending economic structures. When we are able to combine the value of precious metals with the utility of blockchain technology we have the best of both worlds. We may need to call on this value sooner than we think if we wish to avoid being swallowed into increasingly centralized systems.
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