In the past, it was mentioned that the United States and the United Kingdom are competing for the global settlement currency. There are two people mentioned in it, White and Keynes. Let me tell you a little bit about White. During World War II, he proposed that all Allied soldiers receiving aid from the United States must use U.S. dollars. Moreover, when the United States liberated these countries occupied by the Nazis in Germany, White pushed dollars into the country's market every time it liberated a country. How to push it? What he did was to undervalue the dollar and overvalue the local currency. After overestimating the local currency, the local boss surnamed very enthusiastically exchanged the local currency for US dollars. Doesn’t everyone circulate dollars in this exchange? Use this method to expand the circulation domain of the dollar. There is an important concept here, that is, when the value of your currency is lower than other currencies, other people are willing to hold your currency. Your currency circulation domain will automatically expand. Some people may have doubts. In this case, wouldn’t the United States suffer? Because you are equivalent to giving up part of your own value to others. In fact, let’s think about it, if you open a restaurant now, you have to have a big opening bonus, and the guests who eat for the first time will get a 50% discount, right? The second time, the third time, as long as he comes here often, he will continue to contribute value to your hotel. The internationalization of the US dollar is actually the same idea. After you spread out the US dollar, and when everyone has formed a consensus on the US dollar, won't you earn back the money by printing a little more currency in the future? The reason is the same.
White actually has a very thorough understanding of this issue. When did he start this White Project? December 14, 1941. Note that this is a week after the United States entered the Pacific War, a week after the attack on Pearl Harbor (December 7). White received an order from above to draft a plan. What was the theme? It was the post-war plan for the US dollar to rule the world. It shows that the Americans have already begun to consider post-war issues as soon as they entered the war.
White's plan begins with three questions. After the war, Europe must be in chaos. The first major challenge is to stabilize the currency situation in Europe after the war, so that everyone's currency will not collapse. So this concept gave birth to an important institution in the future world, which is the IMF (International Monetary Fund). What is the second question? Reconstruction after the war requires money, so an international institution must provide funds. This is the later World Bank. The third problem is that after our economy develops, we must do international trade, so you need to have a set of rules when you do international trade. This is the General Agreement on Tariffs and Trade we saw after the war, which is now the WTO, the World Trade Organization. These three major international organizations were actually conceived by White at the end of 1941. Of course, more importantly, how to establish the hegemony of the US dollar. Among the White plans he proposed, this plan, simply put, is that the global currency should be linked to the US dollar, and the US dollar should be linked to gold. Why is it pegged to the dollar? That is, the currencies of our countries and the U.S. dollar must maintain a stable exchange rate. All currencies should not depreciate by more than 1% against the U.S. dollar, and any excess of this amount must be approved by the International Monetary Fund to stabilize the exchange rate. Why stabilize the exchange rate? Because the United States was a big industrial producer and a powerful trade country at that time, American goods were sold everywhere in the world, and other countries were destroyed by the war, so American goods can be said to be popular all over the world. At this time, if other countries engage in trade depreciation or trade barriers, it will prevent American goods from entering other markets, so the United States does not allow it. At that time, the United States believed that the basis of free trade was a stable exchange rate. Under such circumstances, the Federal Reserve is equivalent to the world's central bank. Through the fixed exchange rate policy, the Fed's monetary policy will be automatically transmitted to various countries. When the US dollar raises interest rates, all countries will follow suit. In fact, it has global hegemony. Then if the Federal Reserve acts as the world's central bank, the fixed exchange rate policy protects the export interests of the United States. The United States has another veto in the IMF, and the plan White is involved in is perfectly in line with the national interest of the United States. Internally, the country's internal policy, monetary policy, and fiscal policy are completely empowered by Americans, and I can do whatever I want. But externally, there are restrictions on other countries, and you cannot depreciate the U.S. dollar by a large margin. So this is called controlling others externally and giving yourself freedom internally. This set is completely in line with the interests of the United States. This is the heart of White's plan.
Of course, Keynes began to conceive of Britain's version of future postwar monetary policy in August 1941, four months before White. Keynes' plan can be summed up in one sentence: the global currency is linked to Bancor, and Bancor is linked to the share of global trade. (Bancor is a virtual currency created by Keynes. This has been mentioned before.) The currency system of Bancor has caused a lot of controversy because it is not an existing currency and has been completely created. The Bank for International Settlements is responsible for creating Bancor and distributing it to the central banks of each country. This Bancor operates in a closed system and does not flow into the real economy. It is mainly used for settlement when this country makes trade settlement with another country.
Keynes also proposed a dual headquarters operating system. That is to say, the world currency system must have two headquarters. One is headquartered in New York and the other is in London. Of course, the Americans are in charge of New York, which is responsible for managing the currencies of North America, South America, and Asia. The London headquarters is responsible for managing the system of the British Empire, plus Europe and the Middle East. So from the point of view of Keynes, the main idea is entirely in line with the national interests of the United Kingdom. We see that this plan has several characteristics. First, why does it advocate Bancor instead of gold. Because Britain has no gold, but it needs large-scale international trade. Because the trade volume between the Commonwealth system is very large, but it does not have gold, how to do settlement, how to do settlement. Do it very passively. If you rely on the dollar, it will be controlled by the United States, so it must create a new currency to solve this dilemma. The second feature is that the pound was under selling pressure in various colonial countries, because everyone wanted dollars at the time, and there would be a run on the pound. If you want to loosen foreign exchange controls, those British colonies will sell the pound. In this way, the British monetary system collapsed in minutes. If I come up with Bancor, this problem will be resolved. You don't need to hold US dollars, because international trade is not settled in US dollars, so what's the point of grabbing US dollars? It's pointless. So we see that both the Keynesian plan and the White plan are in line with the interests of their respective countries. It is impossible to do this kind of noble practice without saying what to do for the sake of all mankind.
So why doesn't the United States directly propose the dollar standard, and why must it bring out gold. This is a strategy of White. If you directly put the dollar standard on the table, many countries will rebound, such as the United Kingdom, which will definitely oppose it firmly. There are also some countries such as the Soviet Union, which will cause those socialist countries to become a separatist region and engage in currency separatism. Then the United States will not be able to establish a truly unified world market and a unified world currency, so there must be a transition. First use gold. Everyone accepts gold historically, in terms of inheritance, and in terms of ideology and emotion, and gold is controlled by Americans. At that time, the world had 28 billion gold reserves, of which 22 billion were in the hands of the Federal Reserve. Therefore, the United States controls various countries through gold, which is justifiable.
Keynes and White had two different views, representing the interests of Britain and the United States. It must be pinched. The British had high hopes for Cairns. Because Cairns has a very high international reputation. He is a very famous economist in the world. White, for his part, was nothing more than a technocrat. The United Kingdom said that although the Americans are rich, we Brits have brains. The plan proposed by Keynes is not known to be many times better than White's plan. But in the actual negotiation process, that is not the case at all. It’s nothing to be famous, rich people don’t care about you at all, if you need aid from the United States, then you have to listen to me, and you have to do it according to me. Bancor was directly rejected by the United States, and I have never heard of it. The Bank of International Settlements, the United States says that the Federal Reserve will be the future central bank of the world. There is no need to create a Bank for International Settlements, and they can simply shut it down. Then Keynes said that we have a London headquarters and a New York headquarters. When the Americans heard it, what do you want to do? Isn’t this still a currency separatist regime? There is only one headquarters, and it is in the United States, and it is in Washington. This is a very strong attitude of the United States. From this negotiation process, we will see that every important point of view and main core proposed by Keynes has been rejected by the Americans one by one. In the end, the two sides were deadlocked on a key issue. what is it then? What is the currency standard of the future world? This concept is called currency convertible into gold. The two sides have serious differences on this concept.
Keynes said that all currencies, as long as they can be converted into gold in the future, are currencies that can be converted into gold. Central banks around the world can create their own currencies based on this. Americans say that the currencies that can be exchanged for gold are the US dollar and gold. The British are definitely not willing. If you put the US dollar in such a high position, what should we do with the British pound? Keynes was staunchly opposed to any special treatment for the dollar. White proposed to discuss it at the conference. This conference was on July 1, 1944. At the invitation of the United States, 44 countries from all over the world went to a place called Bretton Woods in New Hampshire, USA, and held an international conference. Who is the protagonist in this conference? Logically speaking, White should be the protagonist, after all, he is from the United States. But Keynes stole the limelight from White because of his popularity. (The General Theory of Employment Interest and Money) was written by Keynes, very famous.
However, White doesn't care about these things. What he cares most about is to solve the issues that are still debated at this meeting. It is the currency standard. We must put the dollar on the basis of the standard system, so he designed a lot of meeting details. Judging from the details of these designs, it can be seen that White is very scheming. For example, among the three major issues, the IMF, the World Bank, and the General Agreement on Tariffs and Trade, the most important thing in White's view is the IMF, because he laid down the entire principle of the future global currency. So he thought he wanted to identify himself as the chairman of the IMF committee, and then he arranged for Keynes to serve as the chairman of the World Bank committee, taking Keynes away from the main battlefield. Also, when 44 countries hold a meeting together, there must be a mess of debates, and many issues will be out of control, so White uses all the people in the secretariat of the meeting to make meeting minutes. No matter how noisy you are, just organize the meeting minutes , you can control the formation of the final document. Also, in the absence of Keynes, a very important major decision to establish the dollar standard must be passed. But White didn't want to make this matter earth-shattering. He wanted to insert the issue of the dollar standard into a topic of technical details for discussion, so that Keynes would not be able to find out, and the British delegation would not be sensitive to this issue. Under such circumstances , Suddenly, quietly passed the bill, and this is how the trap planned by White began to play out at 2:30 pm on July 13.
What was on the agenda of the meeting at that time? Don't you want to set up the International Monetary Fund? Each country has to contribute money and pay capital, which can be said to be a detailed meeting of bookkeeping. Keynes saw that this meeting was not very important, so he went to preside over the meeting of his bank, and he was not present. Then White said that a meeting was held to discuss how each country should pay the start-up capital of the IMF. Everyone opened the agreement, and there was a clause in this clause: the money everyone pays should be a currency that can be converted into gold. Didn't Keynes argue with White about this keyword for a long time? White is going to take this opportunity to confirm this. When you see this keyword, many countries will naturally have doubts. The Indian delegation spoke, we do not understand this clause, what is a currency that can be exchanged for gold. After the Indian delegation finished speaking, the British delegation also spoke. From the perspective of accounting and bookkeeping, the definition of this term is not very clear. Let’s just consider the reality. Let’s just talk about US dollars, US dollars and gold. Clear. Heck, White agreed right away after he said that. From a practical point of view, only the U.S. dollar can be exchanged for gold in the world now, so the currency that can be converted into gold should refer to the U.S. dollar, so that it is convenient for everyone to keep accounts. This was the moment White had been waiting for. While Keynes was away, someone raised the key concept of what convertible gold really meant. Now that the British delegation has already made a statement, and added a very stupid sentence, if we want to adjust, then all documents may need to be changed. Well, White immediately cuts to that sentence, and barring objections, we now move on to the next topic. At that time, the representatives of all these countries, because they were not sensitive to this topic, were not fully mentally prepared, and did not know the significance of this topic, so they passed by in such a daze. White asked the American delegation to work overtime overnight to replace all the provisions of the establishment of the International Monetary Fund, including the currency and gold that can be converted into gold, as long as these keywords appear, replace them all with US dollars and gold. This major change is an earth-shaking change. This becomes the dollar standard. Because according to this clause of the International Monetary Fund, all countries that join this organization in the future will automatically accept this clause. What is the essence of this clause? When the central banks of various countries want to create their own currencies, they can only create currencies with US dollars and gold as collateral. This is typical of the dollar standard. The British pound was kicked out. This change is actually the core and soul of the entire Bretton Woods system. If it is discussed on the table, Keynes is willing to They will definitely not give in. The talks between the two may collapse and the agreement cannot be signed, but White dismissed Keynes and quietly passed the agreement without the British delegation not paying attention. Therefore, in the terms of the establishment of the International Monetary Fund, this item was added.
So where did Keynes go? Keynes didn't find out until the end of the Bretton Woods conference. Of course, we don't know why Keynes didn't see this change. I guess there are two possibilities: one is that the Americans never gave Keynes the modified and complete version, so it is impossible for him to find out. The second possibility was to give it to Keynes, but he didn't look carefully. Anyway, the terms were passed and the meeting was over. Keynes found out too late.
After this meeting, the cornerstone of the entire monetary system has changed, and the benchmark for the future reserve currency of the entire world has changed. Banknotes issued by countries around the world must be issued with US dollars as reserves. This means that with the economic development of various countries, the amount of U.S. dollar reserves must increase, which means that everyone needs U.S. dollars, which makes the U.S. dollar lay the foundation for its hegemony in the 70 years after the war.
The currency battle between Britain and the United States is actually over here. By the way, let me talk about another mistake made by the United Kingdom.
In August 1945, World War II was coming to an end. At that time, Britain felt that Germany would surrender in May, the Soviet Union would attack Japan in August, and the United States would attack Japan. According to the calculations of the British Empire, it would not be so easy to attack Japan, because the battle of Iwo Jima by the United States was the An obvious example. Therefore, the British expect that Japan will last for more than 9 months in this battle, and the war will not end until 1946. What good does this do for the British? Because this war is not over, the U.S. Lend-Lease Act provides 5 billion yuan in aid materials each year, and can also give some subsidies to Britain. Under the circumstances at that time, Britain had to rely on this U.S. aid to maintain its economy. Unexpectedly, Japan announced its unconditional surrender on August 14. As soon as Japan surrendered, the new US President Truman announced the final value of all aid to Britain on August 17, three days later, and the Lend-Lease Act stopped. ,failed. The United Kingdom is now in a hurry, and found that the United Kingdom’s international trade deficit, the international balance of payments deficit is as high as 5.6 billion U.S. dollars, and the U.K.’s foreign exchange reserves, because the U.S. Treasury Department has been choking, it is only a few hundred million U.S. dollars, which means that once If the aid from the United States is stopped, the money and foreign exchange reserves of the United Kingdom will be exhausted in a few days, which is not enough. Therefore, the UK must carry out large-scale financing to survive. At this time, Keynes proposed three plans to Britain. The first plan is called economic austerity. What is economic austerity? That is, if the United States does not give aid, we will be independent and work hard, and we British will live a hard life, lower our living standards, and temporarily leave the ranks of the first-class powers, and we will bear it by ourselves. The second solution is the temptation of interests. What is it? Borrowing a large amount of money from the United States, say 5 billion U.S. dollars, together with some foreign exchange reserves in the United Kingdom, can barely overcome this short-term economic crisis. However, it may be forced to accept Article 7 of the US "Lend-Lease Act", which is to eliminate the clause of the Imperial Preference System. Keynes was firmly opposed to this proposal, although I proposed it. The third is fairness and justice. What does it mean? So many people died in the British Empire and they made such a great sacrifice. The Americans have made war fortunes, and many other countries have made war fortunes. You should give Britain a certain amount of compensation. How will you give this compensation? That is, from 1939 to 1940, when the United States passed the Lend-Lease Act, didn't the British spend 5 billion US dollars to purchase military supplies in the United States? Of the 5 billion U.S. dollars demanded by the British, the U.S. should follow the principle of justice and return 4 billion or 3 billion U.S. dollars to us. U.K. When the government heard this, it was a good idea. Okay, Keynes, you can talk to the Americans according to this principle. Keynes made yet another major mistake. Because this plan is impossible for the Americans to agree to. Because in the eyes of the Americans, in the two world wars, we Americans paid for the people, so many people died, and so much money was spent to help you soar in the UK. During the entire World War II aid, the US gave the UK 220 Billion dollars, you still ask us for a refund, which is unreasonable. Keynes talked with the United States, and the talk collapsed as soon as he talked. Americans say no way, don't think about it at all. As a result, the plan that Keynes himself advocated could not pass, and he firmly opposed the plan of enticing interests. So we are in a stalemate. The Americans are more generous and say that we don’t want to talk about the refund, but we will give you a loan of 5 billion U.S. dollars, which will be repaid in 50 years and the interest is 2%. This condition is the most favorable that we can offer in the United States. There are conditions, and I will also give you a relief clause, that is, when your British economy encounters quarterly difficulties, you cancel the imperial preferential system, and we can discuss to ease your internal pressure in the United Kingdom. But because Keynes, due to his own stubbornness, did not seize this opportunity, he resolutely opposed it, stood there, and fell into a stalemate. The United Kingdom saw that it was not good enough, and hurriedly sent a delegation to strengthen its negotiating power. In fact, in a sense, they want to replace Keynes. negotiating strength. In fact, in a sense, they want to replace Keynes. negotiating strength. In fact, in a sense, they want to replace Keynes.
Then there was a disagreement within the British delegation. The Americans looked at it and said, how can you say that you have been given such a good treatment, but you still don’t accept it? Only 3.75 billion U.S. dollars can be provided to the United Kingdom, and an important condition is that the United Kingdom must lift foreign exchange controls after one year. Keynes is in a desperate situation at this time, and his principle of fairness and justice has been blocked by the United States. At this time, the second option he wants to talk about, that is, the so-called profit temptation principle has been reduced from 5 billion to 3.75 billion. If you don't sign it, you don't even have this condition. Sign, how to explain to the UK.
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