Creature From Jekyll Island by G. Edward

While this was happening in our home-town stadium, the same game was being played in the international arena. There are two primary differences. One is that the amount of money at stake in the international game is much larger. Through a complex tangle of bank loans, subsidies, and grants, the Federal Reserve is becoming the "lender of last resort" for virtually the entire planet. The other difference is that, instead of claiming to be Protectors of the Public, the players have emblazoned across the backs of their uniforms: Saviors of the World.

BRETTON WOODS: AN ATTACK ON GOLD

The game began at an international meeting of financiers, Politicians, and theoreticians held in July of 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire. Officially, it 86 THE CREATURE FROM JEKYLL ISLAND

was called the United Nations Monetary and Financial Conference, but is generally referred to today as simply the Bretton Woods Conference. Two international agencies were created at that meeting: the International Monetary Fund and its sister organization, the International Bank for Reconstruction and Development-—

commonly called the World Bank.

The announced purposes of these organizations were admirable. The World Bank was to make loans to war-torn and underdeveloped nations so they could build stronger economies. The International Monetary Fund (IMF) was to promote monetary cooperation between nations by maintaining fixed exchange rates between their currencies. But the method by which these goals were to be achieved was less admirable. It was to terminate the use of gold as the basis of international currency exchange and replace it with a politically manipulated paper standard. In other words, it was to allow governments to escape the discipline of gold so they could create money out of nothing without paying the penalty of having their currencies drop in value on world markets.

Prior to this conference, currencies were exchanged in terms of their gold value, and the arrangement was called the "gold-exchange standard." This is not the same as a "gold-standard" in which a currency is backed by gold. It was merely that the exchange ratios of the various currencies—most of which were not backed by gold—were determined by how much gold they could buy in the open market. Their values, therefore, were set by supply and demand. Politicians and bankers hated the arrangement, because it was beyond their ability to manipulate. In the past, it had served as a remarkably efficient mechanism but it was a strict disciplinarian. As John Kenneth Galbraith observed:

The Bretton Woods arrangements sought to recapture theadvantages

of the gold standard—currencies that were exchangeable at stable and predictable rates into gold and thus at stable and predictable rates into each other. And this it sought to accomplish while minimizing the pain imposed by the gold standard on countries

that were buying too much, selling too little and thus losing gold."

The method by which this was to be accomplished was exactly the method devised on Jekyll Island to allow American banks to 1. John Kenneth Galbraith, Money: Whence It Came, Where It Went (Boston^

Houghton Mifflin, 1975), pp. 258, 259.

NEARER TO THE HEART'S DESIRE

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c r e a t e money out of nothing without paying the penalty of having their currencies devalued by other banks. It was the establishment of a world central bank which would create a common fiat money for all nations and then require them to inflate together at the same rate. There was to be a kind of international insurance fund which would rush that fiat money to any nation that temporarily needed it to face down a "run" on its currency. It wasn't born with all these features fully developed, just as the Federal Reserve wasn't fully developed when it was born. That, nevertheless, was the plan, and it was launched with all the structures in place.

The theoreticians who drafted this plan were the well-known Fabian Socialist from England, John Maynard Keynes,1 and the Assistant Secretary of the U.S. Treasury, Harry Dexter White.

THE FABIAN SOCIETY