At the end of WW2 most of the world’s major economies were in shambles, with a lot of international debt outstanding. Political leaders wanted to do something to handle that in order to head off what had happened after WW1, when international debts were defaulted on and countries started manipulating their markets to gain advantages over each other. The economic mess after WW1 had contributed to the making of WW2; being able to avoid any kind of a repeat was a priority.
So in 1944 economists and policymakers from 44 different nations, including every Allied nation, got together in Bretton Woods, New Hampshire, to work out some kind of agreement about how the world economy would work after the war ended.
The agreement they came to was that all the nations would establish fixed exchange rates with each other, and all nations had to agree to maintain convertibility of their currency to U.S. dollars. U.S. dollars, in turn, would always be convertible to gold at a certain rate. The agreement also established the International Monetary Fund and (what became) the World Bank to maintain this system and to provide a means of cooperation between the countries.
The representative from the U.K. (Keynes) wanted the system to be based on a made-up currency, but the U.S. threw its weight around and made it the dollar.
The system worked because of the economic dominance of the United States. You could count on the dollar. But it also meant that the United States had to be putting money out into the world, so that other nations had dollars with which to trade. The United States had to maintain a “balance of payments” deficit with the world. One way to do that would be to buy a lot of stuff from other countries and thus make dollars flow out, but we didn’t want to do that because we had a strong economy; we produced stuff here and didn’t need to buy it elsewhere. So the U.S. decided to just start donating money to other nations. Here you go Europe: a blank check to help you rebuild from the war. Here you go Asia: money to help feed your poor. And so on. We were fine with that because that money bought influence. The U.S. gained some say over how other nations did things.
This all started to break down when our position drew us into Vietnam. We were financially supporting South Vietnam when the North Vietnamese started fighting it, and so we got involved. First under JFK, then LBJ, then Nixon. We ended up spending over $130 billion in Vietnam ($1 trillion in today’s money). Add to that LBJ’s Great Society, which increased domestic spending. This all added to America’s debt, which began to impact the strength of the dollar and our ability to give money away to the rest of the world.
Here we are, printing money… but remember that we’ve agreed that dollars would always be convertible to gold at a certain fixed rate. The amount of dollars in existence was going up but the amount of gold was not. Or not as fast, anyway, and so it became harder and harder to keep that gold promise. France, having always been skeptical of America’s dominance of the system, literally sent a warship to New York to retrieve its gold in August of 1971. They got it, but they were the last to do so. Nixon realized that the end was nigh for Bretton Woods and declared an end to the gold standard a few days later.
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When Nixon ended the gold standard in 1971 the dollar quickly devalued and it started a period of high inflation. OPEC embargoed the US starting in late 1973, in retaliation for American support of Israel. The embargo and reduced output from OPEC caused recessions in other parts of the world, leading to tension between the US and some of its allies, who faulted the US for provoking the embargo.
Enter: the “petrodollar”.
Once the embargo ended the United States and Saudi Arabia, OPEC’s biggest member, worked out a deal. The deal was that OPEC would export oil only in dollars, keeping our buck on top post-Bretton Woods, and in return the United States would provide weapons and military assistance to the Saudis.
It kept us on top. You have to have dollars if you want to buy oil, to this day, and you have to get dollars from the US, ultimately. In 2000 Saddam Hussein decided to start selling Iraqi oil in euros. By 2003 5% of the world’s oil was produced by Iraq and was being sold in euros. Which… was right about the time a WMD mirage appeared somewhere in the Iraqi desert and the United States started shooting bullets its way. Maybe there was a connection.
The petrodollar is still the system today, though America’s influence in the world seems to be changing, maybe even waning.
You’re talking to an anarchist, so anarchy isn’t a problem to me. I want less control by government not more. More control = more opportunity for corruption. More centralized = more government power. More decentralized = more power to the people.
To me the problem with crypto is that it’s really easy for people who currently have power to consolidate their power even further by buying vast amounts of crypto in hopes that crypto will take over fiat money worldwide.
I don’t have a solution for stopping bad actors, and that is one of many reasons why I’m not a crypto bro.
But in a perfect world it would make a great abstraction of trading on computing power. And unlike the petrodollar it could be backed by only renewable resources and climate friendly. But again, perfect world.
I don’t mean anarchy in the sense you mean it, I mean it’s total chaos.
And no, in the case of currency, more decentralized means no one knows what the price of milk is from week to week. Currencies need stability or they are not very useful. Hyperinflation is not an imaginary scenario.
Those are not pictures of bank notes used by super rich people. Quite the opposite:
Yes you do, you just don’t like it. The solution is a global governing and regulating body.
The limitations of computing power would regulate the value of the crypto, just like the supply of oil regulates the value of the petrodollar.
Governing bodies would just get corrupted. Gestures broadly at the world
One could argue that an OPEC like entity would emerge in the crypto space where they artificially control supply.
I’m not arguing in favor of crypto, I’m an ancom, I’d prefer a moneyless society entirely.
Who puts those limitations on it? Who gets to decide what those limitations are? Would those limits be baked-in forever (terrible idea) or changeable when new economic situations we might not even have thought of 10 years earlier arise?
Seems to me the global body I am talking about would be the rational people to be in control of all that.
As far as preferring a moneyless society, how would you propose people be encouraged to do dangerous but necessary jobs like mining for important minerals or servicing high voltage electrical cables if they aren’t going to be paid to do it? I think you’ll find that people generally don’t do those jobs because they think they’re fun.
The limitations would be innate. Especially if it were tied to renewable resources, there’s a finite amount of resources on the planet even with renewables which can’t be 100% renewable by default.
People work because they have an innate drive to do so. Look at firefighters and search and rescue for example. Most are volunteer (at least where I am) and they run into burning buildings to rescue people for no money. Or they’re hiking into remote wilderness in awful conditions (deep snow, -20F outside, high winds, miles from civilization, huge cliffs to fall off of and die) to rescue lost skiers and hikers. Hell there’s plenty of rich people who could retire yesterday and live their lives out drinking Mai tais on the beach without a care in the world and yet for some reason they still show up to work, because they want to.
I doubt people would be doing stupid pointless jobs pushing papers around in circles if they weren’t financially manipulated to do so.
That’s not how software works.
Until new technology is developed that makes the whole thing significantly cheaper and then the market drops out and since there’s no governing body, the global economy crashes and there’s another Great Depression. Macroeconomics does not seem to be your strong suit.
There are not enough people who have an “innate drive” to do every job that needs doing in a modern society. No one has an “innate drive” to work at a factory because we didn’t evolve to work in factories. People don’t even have any sort of “innate drive” to farm, because we evolved to hunt and gather, two things that generally aren’t necessary anymore.
Please do tell me about all of these people who want to be mining things because they find mining so enjoyable.
And yet those jobs are also necessary, because things need to be recorded for future reference, so how do you get people to do them if you don’t pay them? Yes, they sound pointless. Anyone who has actually worked those jobs can tell you why those papers are pushed around.
Hi 2008 called and wants it’s fiat money back. Guess you weren’t alive for that market crash? You’re clearly a child or young adult who didn’t live through that as an adult or you’d know how easy it is to manipulate an economy and crash it so the 1% of the 1% can consolidate even more power. I see based on your defense of truly pointless jobs that you’re a worker of the laptop class, I’m sure your marketing or business degree is really important to making the world work. Not.
The limitations are innate because there’s finite resources on a finite planet. If we’re able to come up with infinite renewable resources then we can get the luxury gay space communism we all want.
The way (some) crypto works is by making even more complex mathematical calculations that require more and more computing power. Limit the computing power by limiting resources (finite planet, remember?) and there’s your regulation.
Of course, this isn’t a perfect world, and tech companies will do anything in their power to get a leg up on their competitors and will go through all the energy on this earth to make a quick buck (looks at the AI companies)
I stopped reading at “you’re clearly a child.” If this is going to devolve into insults, I’m not interested. I’m not surprised you think that is the level of discourse to stoop to, however.
You have a child like understanding of economics if you think the current way of doing things is working and somehow won’t lead to an economic crash. We already had an economic crash not long ago. And we’re about to go into another.