Every 10-25 years, the world seems to go from one financial crisis to another. Truckfuls of economic analysis follow each crisis - and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don't see is that the Anglo Saxon bloc with 80% of the world's gold production in a choke-hold does what it wants.
Why has this system been such a failure? Simple!
The Bretton Woods system.
The world after WW2, has been governed by a financal system that has been a failure - the Bretton Woods Agreement, a millstone around the developing world. As WW2 came to a close, British-American economists came together and devised this system. The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.
It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Did anyone notice how much Britain resisted and finally did not join the European currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with reserves of a depreciating currencies.
It also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries (and their client states like Japan, etc.) have more than 67% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.
The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved - which are tied to imports from these Anglo Saxon countries.
Highly paid (mostly western) consultants are paid by aid recipients from debt funding - who recommend more debt and more imports which creates greater indebtedness and rising interest payments which need more aid for which more highly paid consultants are required. At the other end, some of this aid, finally ends up with corrupt bureaucrats and politicians - who tax the citizenry more to pay increasing debt.
Bretton Woods - Broken Promises
The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the dollar for gold - at a rate of US$35. This was supposed to be done out of the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).
In 1973 (August 15th), the world got the Nixon Chop - where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$225 per ounce - 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world - especially the poor, developing countries. And the fraud continues.
Some Western countries, especially France redeemed their dollar holding with gold before the float.
Behind Bretton Woods - Gold
The world believed that only the Anglo-Saxon Bloc could deliver. Why?
In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.
Things are still the same
The Anglo-Saxon bloc of ABC countries is still the largest gold production bloc in the world. The Anglo-Saxon Bloc (countries, colonies and companies) still control more than 80% of world’s gold production - and significant natural resources, like oil. They administer 3 out of the 5 largest countries in the world. Hence, their currencies still have significant heft. Apart from military power.
Hence, financial manipulation is easy. The USA is trillions of dollar in debt - and Ben Bernanke, the Fed Chief says we can always print more money. What happens to the Indians, Chinese, Russians - who stupidly even today believe in the American dollar? Well! Anglo Saxon law says, caveat emptor. Buyer beware!! Their latest victims - good old India and China. India and China have significant dollar holdings. The value of dollar had depreciated by 75% in the last 10 years - from US$225 to US$900.
Most of the economic growth in Post WW2 for the poor countries is due to trade growth, de-colonisation, better health care - and decelerating war engines.
What Can Change
India has emerged as the largest (private) reserve of gold in the world. The countries of South Africa, Ghana, Peru, Indonesia, China, Russia, Papua New Guinea account for nearly 50% of the world’s gold production - though gold operations in these countries are controlled by largely Anglo Saxon Bloc.
A currency bloc, underpinned by India’s private gold reserves - and future expansion of the currency system guaranteed by 50% of the world’s gold production is a feasible start point.
This will make the world more equitable and reduce financial volatility. This will also wean the world away from the savagery of the Anglo Saxon bloc countries who have been involved in every major conflict for the last 400 years.