Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Bretton Woods’

An Inheritance of Incompetence

Posted by hkarner - 16. August 2016

By John Mauldin, August 13, 2016mauldin 

– Dean Acheson

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

– John Maynard Keynes

I don’t often agree with Keynes, but he is the most quotable of all major economists. The above sentence was one of his best. He was right about defunct economists. Of course, he was talking about all those other defunct economists who no longer kept up with his new and improved way of thinking about all things economic. Now his quip comes back to haunt his legacy and his followers.

Theories and practices often outlive their usefulness in our fast-changing world. So do institutions, including those chartered at the 1944 Bretton Woods Conference. In today’s letter we are going to look closely at the International Monetary Fund and a scathing report from its own internal auditors. For those of us who have been following the IMF for decades, the report is not all that surprising.

My real purpose here is not to point the finger at the IMF but to point out where its problems are part and parcel of a greater problem in global institutions. During the next global recession we are going to see a continuation of the same approaches to crisis solving that we’ve seen in the past, based on the theories of defunct economists mixed with personal and institutional biases. Their prescription is a witches’ brew that we will be told is good for us but that will in fact ensure that those of us least able to cope will bear the brunt of its impact. Den Rest des Beitrags lesen »

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From Golden Dollar to Petro Dollar to Narco Dollar

Posted by hkarner - 10. Mai 2016

Dank an H.F.
9.05.2016 Author: F. William Engdahl, NEO

3454344The role as world reserve currency is something no financial hegemon in history has willingly surrendered. It took two world wars for the City of London and Bank of England to reluctantly concede hegemony of the Pound Sterling to the Dollar. As Henry Kissinger is said to have remarked decades ago, “If you control the money, you can control the entire world.” Whether or not Kissinger ever said that publicly, he and his patron, David Rockefeller, certainly believed it. Now, with US government debt shooting past $19 trillion and the true state of the American economy and its infrastructure at its worst since the Great Depression, with most Americans living on the brink of financial disaster, the brilliant financial engineers of Wall Street and Washington have once again come up with a scheme to prolong the role of Dollar as King in the world economy.

The recent Panama Papers revelations by a select group of Western mainstream media including the New York Times, BBC and Süddeutsche Zeitung, were notable as a brazen attempt to attack foreign leaders such as Russia’s Vladimir Putin and China’s Xi Jinping for alleged corruption. Notably, the leaked files of the Panama law firm, Mossack Fonseca, so far have failed to leak even one significant name of a US citizen hiding money in offshore accounts of the Panama facilitators. Den Rest des Beitrags lesen »

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Imagining a New Bretton Woods

Posted by hkarner - 5. Mai 2016

Photo of Yanis Varoufakis

Yanis Varoufakis

Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens.

MAY 4, 2016, Project Syndicate

AUSTIN, TEXAS – The financial meltdown of 2008 prompted calls for a global financial system that curtails trade imbalances, moderates speculative capital flows, and prevents systemic contagion. That, of course, was the goal of the original Bretton Woods system. But such a system today would be both untenable and undesirable. So, what might an alternative look like?

The 1944 Bretton Woods conference featured a clash of two men and their visions: Harry Dexter White, President Franklin Roosevelt’s representative, and John Maynard Keynes, representing a fading British Empire. Unsurprisingly, White’s scheme, founded on the United States’ post-war trade surplus, which it deployed to dollarize Europe and Japan in exchange for their acquiescence to full monetary-policy discretion for the US, prevailed. And the new post-war system provided the foundation for capitalism’s finest hour – until America lost its surplus and White’s arrangement collapsed.

The question asked periodically during much of the last decade is straightforward: Would Keynes’s discarded plan be more appropriate for our post-2008 multipolar world? Den Rest des Beitrags lesen »

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The Fragmentation of Bretton Woods

Posted by hkarner - 16. August 2014

Date: 16-08-2014
Source: Project Syndicate

MOHAMED A. EL-ERIANEl-Erian

Mohamed A. El-Erian, Chief Economic Adviser at Allianz and a member of its International Executive Committee, is Chairman of President Barack Obama’s Global Development Council. He previously served as CEO and co-Chief Investment Officer of PIMCO. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012. His book When Markets Collide was the Financial Times/Goldman Sachs Book of the Year and was named a best book of 2008 by The Economist.

LAGUNA BEACH – The world has changed considerably since political leaders from the 44 Allied countries met in 1944 in Bretton Woods, New Hampshire, to create the institutional framework for the post-World War II economic and monetary order. What has not changed in the last 70 years is the need for strong multilateral institutions. Yet national political support for the Bretton Woods institutions – the International Monetary Fund and the World Bank – seems to have reached an all-time low, undermining the global economy’s ability to meet its potential and contributing to geopolitical insecurity.

When the Bretton Woods conference was convened, its participants understood that the IMF and the World Bank were integral to global stability. Indeed, both institutions were designed to discourage individual countries from adopting short-sighted policies that would harm other economies’ performance, incite retaliatory action, and ultimately damage the entire world economy. In other words, they were intended to prevent the kind of beggar-thy-neighbor policies that many major economies adopted during the Great Depression of the 1930s.

Moreover, by encouraging better policy coordination and the pooling of financial resources, the Bretton Woods institutions boosted the effectiveness of international cooperation. And they enhanced stability by offering collective insurance to countries facing temporary hardship or struggling to meet their development-financing needs.

It is difficult to identify more than a small handful of countries that have not benefited in some way from the IMF or the World Bank. Yet countries seem hesitant to contribute to the reform and strengthening of these institutions. In fact, a growing number of systemically important countries have taken measures that are undermining the Fund and the Bank, albeit largely inadvertently. Den Rest des Beitrags lesen »

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After the Dollar

Posted by hkarner - 27. Juli 2014

Date: 26-07-2014
Source: Project Syndicate
JOSÉ ANTONIO OCAMPO

OCAMPO CC

José Antonio Ocampo, former United Nations Under-Secretary-General for Economic and Social Affairs and former Finance Minister of Colombia, is Professor and Member of the Committee on Global Thought at Columbia University. He is the co-author (with Luis Bértola) of The Economic Development of Latin America since Independence.

NEW YORK – It is symbolic that the recent BRICS summit in Fortaleza, Brazil, took place exactly seven decades after the Bretton Woods Conference that created the International Monetary Fund and the World Bank. The upshot of the BRICS meeting was the announcement of the New Development Bank, which will mobilize resources for infrastructure and sustainable development projects, and a Contingent Reserve Arrangement to provide liquidity through currency swaps.

The Bretton Woods Conference marked one of history’s greatest examples of international economic cooperation. And, while no one can say yet whether the BRICS’ initiatives will succeed, they represent a major challenge to the Bretton Woods institutions, which should respond. Rethinking the role of the US dollar in the international monetary system is a case in point.

One key feature of the Bretton Woods system was that countries would tie their exchange rates to the US dollar. While the system was effectively eliminated in 1971, the US dollar’s central role in the international monetary system has remained intact – a reality that many countries are increasingly unwilling to accept.

Dissatisfaction with the dollar’s role as the dominant global reserve currency is not new. In the 1960s, French Finance Minister Valéry Giscard d’Estaing famously condemned the “exorbitant privilege” that the dollar’s status bestowed upon the United States. Den Rest des Beitrags lesen »

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The global monetary system: Not floating, but flailing

Posted by hkarner - 5. Juli 2014

Date: 03-07-2014
Source: The Economist

After 150 years of monetary experimentation, the world remains unsure how to organise global finance

SEVENTY years ago this month, 730 delegates gathered in Bretton Woods, New Hampshire to reopen an old debate. Global commerce has long faced a fundamental tension: the more certainty countries create around exchange rates, the less room they have to manage domestic economic affairs. Thirty years before Bretton Woods a war wrecked the world’s first stab at the problem—the gold standard—and the attempt to rebuild it in the 1920s led to depression and another war. The exchange-rate system agreed at Bretton Woods lasted only a generation. After 150 years of experimentation the world has yet to solve its monetary problem.

Most monetary systems have been the product of accident rather than design. The classical gold standard developed in industrialising Britain. Its economic success encouraged others to transact on its terms. Germany’s adoption of gold in 1871 put Europe’s two leading economies on one standard; others quickly followed suit.

The gold standard’s priority was the lubrication of global trade. Exchange rates were fixed across economies and capital flowed without any regulatory hindrance. Though the free flow of capital left currencies vulnerable, the system survived for decades thanks to governments’ iron commitment to gold. That, in turn, was built on the relatively feeble political influence of working people and the relative strength of creditors. Central banks refrained from destabilising actions and lent to each other in times of crisis. Den Rest des Beitrags lesen »

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A Bretton Woods for the 21st Century

Posted by hkarner - 28. März 2014

by Don Tapscott, Harvard Business Review, March 2014Tapscott

If you are the leader of a large organization (or only of yourself) who cares about improving the world, here’s a question you should consider: How will you participate in the global solution networks that are increasingly managing to address the world’s problems?

A global solution network is a group of independent parties that have coalesced around a global problem or task they all perceive as important but that none can handle on its own. They become a network when they begin communicating about and coordinating their activities to make progress, rather than working unilaterally and competitively (as, for example, an industry does in a market economy).

Cooperative efforts to solve shared problems have of course arisen in the past. In business the great examples have been standards networks. But the world’s biggest social and economic ills have been addressed by gatherings of nation-states. The model for global cooperation was forged after World War II, when representatives of 44 countries met at Bretton Woods, New Hampshire; the work they did there led to the International Monetary Fund, the World Bank, the United Nations, the G8, the World Trade Organization, and more.

Once state-based institutions like these had taken hold, it became hard to imagine other ways to address territory-spanning social challenges—the human problems that, in the words of Kofi Annan, the former UN secretary-general, “do not come permanently attached to national passports.” But over time it has also become clear that these institutions aren’t equal to the task. Progress on many fronts is stalled.

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Why gold crashes as global turmoil continues

Posted by hkarner - 9. Juli 2013

Some crazy people seem to believe that the crisis is over! (hfk)

Date: 09-07-2013
Source: Fortune

In times of turmoil, gold is considered a safe haven. So why is it still crashing now?

FORTUNE — Gold is down more than 25% from its recent highs, leading some observers to declare it on track for its biggest one-quarter decline since the Bretton Woods system collapsed in 1971.

This is a bit misleading: the average price of gold in 1971 was around $40 an ounce. The following year it was $58. By 1974, the year of the Arab oil embargo, gold averaged $154 an ounce. By taking the dollar off the gold standard in 1971, President Nixon kicked off one of the great risk markets in history, allowing speculators to flee from the occasionally useless (currency) to the utterly useless (gold) whenever the prices of really useful things (oil, food) went up. Den Rest des Beitrags lesen »

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What Will New World Order Look Like?

Posted by hkarner - 18. Juni 2012

Date: 18-06-2012
Source: The Wall Street Journal By SIMON NIXON

Los Cabos in Mexico is by all accounts a delightful place: Chic hotels, excellent beaches and fine weather at this time of year. World leaders descending on the resort for this week’s G-20 summit should make the most of what it has to offer. Nothing they discuss is likely to make any difference to the crisis raging in the global economy.

The world is now a different place to 2009 when, at summits in London and Pittsburgh, the leaders of the world’s largest economies believed they had „saved the world“—as then-UK Prime Minister Gordon Brown put it—with a massive fiscal and monetary stimulus and a comprehensive agenda to reform the financial system. At the time, the G-20’s response was hailed as the start of a new world order. It may turn out to have been the last gasp of an old world order.

That old world order begun in 1944 at Bretton Woods in response to the Great Depression and the horrors that followed. One of its main architects was John Maynard Keynes and his ideas have guided much of the current crisis response. The central challenge in the post-Bretton Woods era has been how to manage economies in the absence of the gold standard. The gold standard had many flaws, but the chief virtue of fixing the exchange rate and constraining the supply of credit was to stop politicians succumbing to the inevitable pressure to respond to crises by debauching the currency, resulting in long-term harm to the livelihoods and living standards of their citizens. Den Rest des Beitrags lesen »

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Out of Control: The Destructive Power of the Financial Markets

Posted by hkarner - 24. August 2011

Date: 22-08-2011
Source: Spiegel

Speculators are betting against the euro, banks are taking incalculable risks and the markets are in turmoil. Three years after the Lehman Brothers bankruptcy, the financial industry has become a threat to the global economy again. Governments missed the chance to regulate the industry, and another crash is just a matter of time. By SPIEGEL Staff.

The enemy looks friendly and unpretentious. With his scuffed shoes and thinning gray hair, John Taylor resembles an elderly sociology professor. Books line the dark, floor-to-ceiling wooden shelves in his office in Manhattan, alongside a bust of Theodore Roosevelt and an antique telescope.

Taylor is the chairman and CEO of FX Concepts, a hedge fund that specializes in currency speculation. It’s the largest hedge fund of its kind worldwide, which is why Taylor is held partly responsible for the crash of the euro. Critics accuse Taylor and others like him of having exacerbated the government crisis in Greece and accelerated the collapse in Ireland. Den Rest des Beitrags lesen »

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