The deal that broke the world.
The Bretton Woods conference was held in New Hampshire during three weeks in July of 1944 to set the basis for the post-war financial system. Basically the idea was that the US dollar was to be backed by gold with a fixed exchange ratio and all other currencies were priced to the dollar. However, this agreement could not exist in vacuum, so obviously much more was agreed upon.
Or, to be realistic, simply because the US was the only major power standing at the end of 2nd world war, the others were made an offer they could not refuse.
To put it in context, in times leading to the war the only way to secure supplies and markets was to take control of them, that’s why the strong countries had colonies.
Now the Americans were offering something different – that they will secure supply lines and keep their market open for imports for the war thorn countries to get back on their feet in exchange for one thing – you have to choose sides, you need to be with us against communist Russia.
And secure the supply lines they did – the Americans have 11 super carrier battle groups and it is said that each one of those has more long range striking capability than the rest of the navy in the world combined.
As result of the free trade deal, a number of economies entered the world’s business, among them China.
Then an important thing happened – the US won the cold war, the Berlin wall went down and there was no one to protect against anymore.
The Russian army exited Eastern Europe, and the world’s stage, in a biggest retreat of an army not beaten in a battle in all of human history.
But the system built since the World War II was not to facilitate trade from American perspective – it was to provide security. The Americans don’t really care about the trade – they have all they need on their continent (or within NAFTA) and they are becoming energy self-sufficient. And the more business they can bring back home, the more good jobs are created.
It’s a win-win.
Now, if you’re China, this sets off alarm bells of high frequency. It is no accident that president Xi was granted virtual dictatorship in March of last year as “president for life”. He needs to keep the ship on an even keel and he needs all the power to do that.
The Chinese know that something new is coming – just consider their investments in real estate in Australia and Canada. Why would you do it if things at home were going good?
The problem for the world is that the Americans don’t care anymore.
And it’s a big problem.
President Trump is extracting America from the international supply chain - that is what import tariffs mean. And it’s clear to me that we would get the same under Hilary, it would maybe take 4 – 8 years of soft talks, back room deals and whining on TV. Under Trump the same happens in maybe 4 – 8 weeks.
So a new order is coming, I am convinced that we have passed the point of no return by now.
Just watch who came to the White House after Trump was elected to understand who gets it – Theresa May was first (and she has no authority to negotiate deals being part of EU, but she still did), Japan’s Abe was second, then Merkel and Xi. The last two visit were disasters, as you can see from the pictures.
Trump didn’t even shake Merkel’s hand and that was the piece of news that was in the media. But more remarkably, he handed her a bill for services rendered for protecting Germany all these years.
And Germany is a place to watch – it imports 85% of its energy, their economy totally depends on access to outside markets and it doesn't have an army to speak of.
Every time I see Angela in the news I think “there goes a woman with a serious problem.”
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Tom Kubiak is the author of The Traveler