The President Nixon Shock of The 20th Century.

Demand As A Tool For Propaganda.

I hope you didn't hold the thought for too long, concerning what I was saying about rare and scarcity, we were able to establish that the difference between both words was ‘Demand’. With that in mind, remember the real definition of money is anything that possesses these three qualities which are;

Acceptability
Store of Value
Scarcity.

Anything having these three qualities can be considered money even though it's just a piece of paper. From History, I've been able to take you through the different transformational periods money had to go through under the supervision of our governments. As civilization happened, we saw how money was no longer seen as money but as a nation’s way of exchange for commodities. That's okay, I'll show you how that has also evolved to become a thing of hoax. How this hoax started might not have been fair to them, because somehow they might have been out of options, but continuing in that direction made it entirely their fault. Before that, let's analyze in-depth what our governments came to understand about the power of demand. Can Demand be manipulated? Can a Country make something of value to be in less demand compared to something of no value? As much as I'd love to answer those questions, let's quickly look at an example in history as you ponder on that rhetorical question. It's meant to serve as a thought-provoking question geared at engaging your thinking faculties and have you question a lot of things that have been in place for years without any real opposing force.

‘ Ancient Spartans discouraged trade with outside city-states, and made heavy iron bars as their official currency instead of precious metals or coins. What does this mean? Their government made something of lesser value more valuable and in demand over actual valuable items, all due to the fear of being attacked or invaded by foreigners. ‘

Sounds familiar? Good. So I guess you have your answer now, Demand can be manipulated. Keep that in mind as we make progress.

The Rise And Fall Of The Bretton Wood System of Monetary Management.

Decisions And Consequences

A lot happened during the First World War of 1914 - 1918. Looking at it in a way, I can’t really blame the governments I mean, they had to do whatever it took to take care of their nations, even though some of those actions would alter the course of events for life, and bring about a whole different future. You still can’t blame them? I mean, they could’ve carefully thought about these things and the ripple effects it would create.

After the First World War, nations needed money for repairs and damages. I mean the war wasn’t supposed to be that big, but somehow it was. As a matter of fact, it was due to Allied forces getting involved that made everyone else on the sideline get involved too. How can alliances cause a war? Before the war, the following alliances existed;

Russia and Serbia
Germany and Austria-Hungary
France and Russia
Britain and France and Belgium
Japan and Britain

As a result of Germany attacking Serbia, it dragged everyone from the other alliances to get involved in the war. The US only entered the war in 1917 due to Germany’s continuous submarine attacks even when they agreed not to use the same method of attacks, which eventually led to the killing of some Americans present in some of the submarine tanks.

Enough about the war. Now you have an idea of what WW1 was all about. You might ask? Where is the connection to our topic? I’ll tell you in a bit.

The war destroyed lives, properties and ultimately led to what they call, the Great Depression in history as you would’ve heard before now. How’s this possible? Let’s look at the possibilities of that and the actions that took place that in turn, had negative impacts on our monetary systems.

As I already explained, the initial factor was the First World War, which upset international balances of power and caused a dramatic shock to the global financial system. The gold standard, which had long served as the basis for national currencies and their exchange rates, had to be temporarily suspended in order to recover from the costs of the Great War, but the United States, European nations, and Japan put forth great effort to reestablish it by the end of the decade. However, this introduced inflexibilities into domestic and international financial markets, which meant that they were less able to deal with additional shocks when they came in the late 1920s and early 1930s. The U.S. stock market crash of 1929, an economic downturn in Germany, and financial difficulties in France and Great Britain all coincided to cause a global financial crisis. Dedication to the gold standard in each of these nations and Japan, which only managed to return to it in 1930, only made the problem worse and hastened the slide into what is now known as the Great Depression in history. The Nations of the world were struggling to cope as a result of the war. Due to this, some power shifts happened that led to the events of another war outbreak twenty years later. What really happened? I'll show you…

The International Depression

The key factor in turning ‘national economic difficulties’ into worldwide Depression seems to have been a lack of international coordination, as most governments and financial institutions turned inwards. Great Britain, which had long underwritten the global financial system and had led the return to the gold standard, was unable to play its former role and became the first to drop off the gold standard in 1931. The United States, preoccupied with its own economic difficulties, did not step in to replace Great Britain as the creditor of last resort and dropped off the gold standard in 1933. At the London Economic Conference in 1933, leaders of the world’s main economies met to resolve the economic crisis, but failed to reach any major collective agreements. As a result, the Depression dragged on through the rest of the 1930s.

Isolationism

The Depression caused the United States to retreat further into its post world war 1 isolationism. Due to this, a series of international incidents occurred during the 1930s without any real oppositions ;

The Japanese seizure of northeast China in 1931,
The Italian invasion of Ethiopia in 1935, and
German expansionism in Central and Eastern Europe.

The United States did not take any major action in response or opposition. When these and other incidents occurred, the United States Government issued statements of disapproval, but took limited action beyond that. On a more positive note, isolationism manifested in Latin America in the form of the Good Neighbor Policy of Presidents Herbert Hoover and Franklin Roosevelt, under which the United States reduced its military presence in the region and improved relations between itself and its neighbors to the south. Presidents Hoover and Roosevelt were to an extent constrained by public opinion, which demanded that primary attention be given to domestic problems. The Hoover and Roosevelt Administrations concentrated upon rebuilding the U.S. economy and dealing with widespread unemployment and social dislocation at home and as a result, international affairs took a back seat. Don't get lost now, we're headed somewhere.

Rise of Fascism

As the United States turned inwards to deal with the lingering effects of the Depression, militaristic regimes came to power in Germany, Italy, and Japan promising economic relief and national expansion. While they achieved some measure of success on the economic front, these regimes began to push their territorial ambitions and received minimal opposition from the rest of the world. The lack of a strong U.S. response to Japan’s invasion of China in 1937, and Germany’s annexation of Czechoslovakia in 1938 encouraged the Japanese and German governments to enlarge their military campaigns. At the time, most U.S. leaders believed their decision to avoid a more active role was justified because of the domestic context, but some began to realize that U.S. inaction allowed the conflict to grow. After the fall of France in June 1940, the United States increasingly committed itself to the fight against fascism. Ironically, it was World War II, which had arisen in part out of the Great Depression, that finally pulled the United States out of its decade-long economic crisis.

The Great Depression caused the United States Government to pull back from major international involvement during the 1930s, but in the long run it contributed to the emergence of the United States as a world leader thereafter. The perception, that the turn-inwards had in some part, contributed to perpetuating the horrors of World War II, caused the U.S. foreign policy makers to play a major role in world affairs after the war in order to avert similar disasters. This major role played by the U.S. foreign policymakers was the turning point for the monetary system of the world.

The Bretton Wood System of Monetary Management.

Preparing to rebuild the international economic system while World War II was still being fought, 730 delegates from all 44 Allied Nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. The delegates deliberated from 1st to the 22nd of July 1944, and signed the Bretton Woods agreement on its final day. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, these accords established the IMF and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group.

The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states. The Bretton Woods system required countries to guarantee convertibility of their currencies into US dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold (or 0.88867-gram fine gold per dollar). It also envisioned greater cooperation among countries in order to prevent future competitive devaluations, and thus established the International Monetary Fund (IMF) to monitor exchange rates and lend reserve currencies to nations with balance of payment deficits.

The United States, which controlled two-thirds of the world's gold, insisted that the Bretton Woods system rest on both gold and the US dollar. Soviet representatives attended the conference but later declined to ratify the final agreements, charging that the institutions they had created were "branches of Wall Street". These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. According to Barry Eichengreen, the Bretton Woods system operated successfully due to three factors:

Low international capital mobility
Tight financial regulation and
The dominant economic and financial position of the United States and the dollar.

However, On 15 August 1971, the United States "temporarily" suspended the convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a Fiat currency ( a currency not backed by a commodity such as gold, silver, copper or bronze). Shortly thereafter, many fixed currencies (such as the pound sterling) also became free-floating, and the subsequent era has been characterized by floating exchange rates. The end of Bretton Woods was formally ratified by the Jamaica Accords ( The accords allowed the price of gold to float with respect to the US dollar and other currencies, albeit within a set of agreed constraints. ) in 1976.

After the end of the Smithsonian Agreement (a new dollar standard, whereby the currencies of a number of industrialized states [ sovereign countries ] were pegged to the US dollar) in 1973, most of the world's currencies followed suit. However, some countries, such as most of the Arab States of the Persian Gulf region, fixed their currency to the value of another currency, which has been associated more recently with slower rates of growth. When a currency floats, quantities other than the exchange rate itself are used to administer monetary policy (monetary policy is normally interpreted as a low and stable rate of inflation).

Everything I’ve said under ‘The Rise and Fall of The Bretton Wood System of Monetary Management’ in a nutshell is this;

The Bretton Wood System represented money backed by commodity which is stable (exactly how it’s supposed to be) versus

President Nixon Shock in 1971 when he decided to break the Bretton Wood System and make fiat currency( money backed by nothing) a norm by introducing the Smithsonian Agreement.

In plain terms, the fiat currency became a norm. More importantly, did you know that this system of money has been issued and regulated by a government before in history and repeatedly failed, yet Mr.President of the US decided to go for it? So in essence, does this indicate his decision to be a deliberate one in order for full control of World Power?

We’ll find out in our next part of the series “Money as an Agenda 04”. As always, my name is Clever Abaribote, your favorite crypto journalist.

Writer and Editor: Clever Abaribote

Sources: Wikipedia, Unsplash