The Day Money Vanishes

If we except the third alternative—my alternative, a New Bretton Woods system, then we must see the U.S.A., in particular, as headed toward the early day, when money has ceased to exist, as in 1923 Germany, or in which only a tiny fraction of current levels has survived a crushing deflationary depression, worse than 1929-1931. What do you do then, Little Man? Where are all those popular opinions you expressed so lavishly until now?

What do you need, then, Little Man?

You need basic economic infrastructure: transportation, power, water management, sanitation, and also schools, medical facilities, and kindred public facilities and services. You need food, which must be produced and delivered. You need manufactured items, physically distributed to where they are needed. You need places of employment, especially in the production and maintenance of basic economic infrastructure, agriculture, and manufacturing. If you do not have these things, then, of what use is money?

If, however, we can secure the production of such required materials and conditions, and if the physical cost of that production and maintenance is less than what is delivered, can we not issue sufficient currency, and lend it through banking channels, to ensure the continuation and growth of such physical output? In other words, even if money were wiped out by a hyperinflationary explosion, we can survive quite nicely, if the physical conditions of infrastructure, agriculture, manufacturing, and related employment are available. If those conditions of growth—as measured in physical terms—can be met, then government can generate and supply the state credit, as in the form of issues of lendable governmental currency-notes, to sustain those physical preconditions of continued economic growth.

In light of the nature of the present global division of labor in the production of these physical conditions of economy, it should be obvious, that agreements on trade among nations are an essential feature of any successful recovery effort. It should also be clear, that regional cooperation has pre-eminent importance. Then, those facts taken into account, the crucial added requirement, is cooperation among nations which are leading exporters of capital forms of improved production technology, and sections of the world which are naturally the principal medium- to long-term importers of such technology.

To that end, we require a system of stable, relatively fixed exchange-rates among currencies: otherwise, medium- to long-term loans are too costly. We require, also, a system of protectionist agreements, by means of which national industries are protected against cheap imports, and also against the state of pauperdom to which "free trade" condemns exporting nations.

The net result is, that the optimal form for a new global monetary system is one modelled on the best features of the 1945-1958 Bretton Woods relations between North America, Europe, Japan, Australia, et al. A fixed-exchange-rate, pro-protectionist system. A more or less global monetary facility should coordinate among regional and cross-regional partnerships, as the case for an Asian Monetary Fund typifies such lines of partnership.

Optimal would be a system including the following keystone elements. A continental European partnership. A trans-Eurasian system of cooperation including Russia, China, India, Japan, and the ASEAN group. An Ibero-American group. A Middle-East/North Africa group. A Sub-Sahara development association. A general system of collaboration among the U.S.A., continental Europe, a trans-Eurasia group, et al.

The sovereign member-states of the new global system would be parties to their regional associations, and also represented in the global system through these regional associations. That political-economic structure, echoing the post-war intentions of President Franklin Roosevelt, should take over the bankrupt remains of presently existing international monetary and related institutions, and conduct both the processes of bankruptcy-reorganization of the present world system, and the launching and direction of the new one.

The problem to be emphasized, is the following.

When three powers of the four-power authority occupying Germany—Thatcher's Britain, Mitterrand's France, and George Bush's U.S.A.—acted, during 1989-1992, to impose, upon both Germany and the world, a caricature of the Roman Empire, as a ruling, Anglo-American imperium upon the world at large, a situation developed, over the course of the recent decade, in which the world had wasted the great opportunity represented by the events of 1989. The good will which might have been mustered, among former "Cold War" adversaries, the NATO powers, and the developing sector generally, has been greatly dissipated over the course of the recent decade. The most recent folly of the U.S. government, in pitting itself against the vital existential interests of both Japan and continental Europe, for sake of that worthless enterprise known as the Al Gore Presidential pre-candidacy, leaves the world no likely option, but reliance upon developing cooperation among regional blocs as the means for bankrupting and replacing the existing world monetary and financial systems.