The Continuing Endgame For Bretton Woods II and the Role of Gold

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by Jesse

“Under this system [Bretton Woods II and the petrodollar], the U.S. is running massive current account deficits to be the source of export-led growth for other countries.  To fund this deficit, central banks, particularly those on the Pacific Rim, are buying up dollars and dollar-denominated assets.”

Daniel Drezner

“The inability of global leaders to address global current account imbalances now truly threatens global financial stability. Perhaps this was inevitable – the dollar has not depreciated to a degree commensurate with the financial crisis.

Moreover, as the global economy stabilized the old imbalances made a comeback, sucking stimulus from the US economy and leaving US labor markets crippled.

The latter prompts the US Federal Reserve to initiate a policy stance that will undoubtedly resonate throughout the globe. As a result we could now be standing witness to the final end of Bretton Woods 2. And a bloody end it may be.”

Tim Duy

Most mainstream economists will fail to acknowledge the pivotal role that physical gold has been playing in the longer term strategies of ‘The New Silk Road’ nations in this century.  They dare not, even if they see it and believe it.

The member of the professional class is deeply conflicted, and must guard their comments if they wish to continue to be rewarded by the established power structure.  It compensates them, and provides them access to information, honors, and influence.

This point of failure in the modern contrivance of self-defining monetary value is the point of weakness in the established power structure that dare not be named.  Or if at all, then only dismissively and with derision.

If money is power, then a fiat reserve currency is the whip hand of empire.  And the less constrained that hand may be, then the greater the power to bend history to the singular will of an elite.

Why is gold such a problem?   Because it is playing an obvious role in the longer term strategies of ‘The New Silk Road’ countries who are no longer willing to act as client states.

The ‘float’ in physical gold available for refinement and delivery into the markets of Eurasia became deeply stressed about two or three years ago.

The world’s central banks became net buyers of gold for their own reserves around 2006, after more than twenty five years of managed sales in support of the Dollar Reserve currency, the reign of the petrodollar, commonly referred to as Bretton Woods II.  After years of steady purchasing, the existing system of gold reserve management has become increasingly unstable.

It is hard to maintain appearances indefinitely.

Behind the scenes, the maneuvering to stabilize the established fiat monetary system has resulted in raids on currencies, and the ‘acquisition’ of reserves, including those of several nations, by other than transparent market mechanisms.

The desperation to maintain an ‘exorbitant privilege’ of a fading empire is a powerful force, and drives spending and diplomatic priorities.

This underlying understanding provides a framework, but hardly the sole or complete rationale, for what is occurring today as the economic order established after WW II, and taken to a different level by Richard Nixon, continues to destabilize.

Will gold continue to be a stumbling block and key piece in the global game of chess?   Nothing is inevitable.

How willing are other nations to place their own working classes on the sacrificial block of inequality?   Will the dollar and its financial system pipelines be allowed to suck the liquidty from the emerging markets?   How practical is the aspiration to a type of regime that requires exponential amounts of force to maintain?

How long can a campaign of force and fraud continue before it becomes unsustainable, so unacceptable to the reluctant victims that they rise up against it?

One might speculate that the US’ loss of credibility with key allies, and the willful betrayals of potential partners into adversaries, may continue to impede the progress of world government by a narrow elite, and thereby fortunate for those who value individual freedom.

But a lack of honor among thieves and plutocrats is hardly a foundation for long term stability.

Related:  Turkish Banks Sell Gold Reserves Amid Raids on the Lira

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