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June 4, 2017


In 1944 during WW II there was a Bretton Woods (New Hampshire) Conference held by the Allies to design what the economic world would look like after the war was over. Among other important determinations, one was that the reserve currency for international contracts would be the American dollar. Such a determination was felt to be necessary since our allies’ currencies were not as stable as ours following their long years of war and uncertainty of valuation of such currencies of the British pound and the French franc, among others.

The reserve currency for the world is still the American dollar these 74 years later, a coveted position for America to have, since we are the only country in the world whose domestic and reserve currencies are identical and especially since we are now engaged in a global economy where there are thousands if not millions of contracts to be expressed in dollar terms, not to mention that the relative stability of our dollar has attracted trillions of dollars in foreign investments in American debt overseen by the Fed and other investments in our economy by the Saudis and others. We are, as some might say, in the catbird seat, but I fear that we are going to lose such a coveted position under Trump, as I will discuss later.

The Conference was attended by economic luminaries such as my all-time favorite economist, John Maynard Keynes, who represented Great Britain and who, unfortunately, died only two years later. (Such a personal choice as I have for Keynes as number one is now threatened by such brilliant contemporary economists as Thomas Piketty and Joseph E. Stiglitz, both Keynesians.) The Conference decided many other postwar items of economic management, but I here am only discussing the reserve currency component, a fix that more or less stabilized the world’s currency headaches while giving us numerous and other incalculable advantages whose nuances I am not qualified to discuss.

Enter stage (ultra) right of Trump and his sidekick adviser, Bannon, a self-professed Leninist who, like Lenin, intends to “destroy the administrative state,” a rather thinly disguised statement which in effect means “destroy the government,” and from the ruins of such destruction come up with some new and yet ill-defined form of government, probably authoritarian. Bannon (through the clueless Trump) is therefore asking us to vote for dictatorship, a system far beyond our embrace of democracy via our Constitution and one which, unless you are a fan of Hitler and Stalin, must be robustly resisted.

So what has all this to do with our choice for the world’s reserve currency agreed upon at Bretton Woods? Why would we voluntarily give up such a coveted position in world finance? It’s because it’s a target of deconstruction in Bannon’s theoretical universe, and likely one in which his puppet Trump would concur. Is it possible?

Yes, and not only because of Bannon’s deconstruction theory; it’s also because there is rumbling among politicians in China and Russia who want to make their respective currencies the reserve currency of the world or, failing that, make the world’s currency composed of “a basket of currencies,” which, of course, is shorthand for Chinese-Russian influence in removing the dollar’s influence in international finance. I fear greatly that Trump under Bannon’s influence will agree with his friend Putin and the Chinese who want to reverse the Bretton Woods agreement on this very important position we have held for 74 years and yield our relatively stable management by the Fed that has led to stability of the domestic currencies of other countries as well as ours to the benefit of all.

I think if we give up this important position to currency manipulators such as China and Russia that we are playing Russian roulette with the world’s currencies, including our own, since such currency values in real terms are likely to be politically manipulated to our disadvantage. With a Leninist adviser and a president who is a central clueless figure in our domestic Punch and Judy political show, it could happen, and all preceded, of course, by propaganda designed to soften up the public for such a possible surrender of our coveted position, so let’s be aware – very aware of the consequences.    GERALD     E








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