Thursday, July 28, 2011

Where the IMF was born ...

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While our rulers were testing whether they could crash the United States financial system through a combination of political brinksmanship and sheer stupidity, I've been offline for four days, hiking through New Hampshire's Presidential range. An Appalachian Mountain Club naturalist gave us a tip: "When you get down, you can see where they signed the Bretton Woods agreement -- just walk in." So we did, muddy boots, filthy clothes, smelly bodies and all.

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In 1944, the rulers of the winning side in World War II wanted to create a financial system that would be rock solid. They believed the contentious national financial policies of the 1930s had led to the Great Depression and contributed to the catastrophic war. They also wanted to be sure they stayed on top. So they held a conference of 730 delegates from 44 nations at the Mount Washington Hotel in Breton Woods, New Hampshire. Pretty swanky place, then and now.

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Nice digs for a meeting of the masters of the universe.

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U.S. Secretary of the Treasury Henry Morgenthau Jr., photographed here in conversation with the British economist J.M. Keynes, led the meeting in setting up the International Monetary Fund and the predecessor organization that became the World Bank.

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The Bretton Woods agreements, signed at this table, pegged the world financial system to the dollar -- and the dollar to gold. In 1971, President Nixon ended the arbitrary (and essentially irrational) practice of backing the dollar with gold and thus ended the original Bretton Woods regime. But the status of the dollar as the world's de facto safest form of money remained -- until our current clowns (mostly the Republican ones) put it in danger. If they succeed in crashing what remains of the international financial system to attain their dream of a world where they and their rich friends don't have to pay taxes, people all over will suffer. Evidently they don't care.

The institutions created at Bretton Woods have not been an unmixed blessing to most people in the world. The International Monetary Fund has forced brutal austerity regimes on poor countries to ensure they transfer their wealth to richer nations and individuals. But international financial anarchy is not good for most people either.

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In the tranquil lobby, this fellow just stares down at the passing cast of characters, beyond worrying any more about it all. I had to wonder whether he hung there in 1944.

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