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BRETTON WOODS II: A NEW WORLD ARCHITECTURE

George Soros and his Institute for New Economic Thinking (INET) are spending approximately $50 million dollars this weekend bringing together key Professors, Economists, Bankers, and a variety of other illuminated scholars for the highly anticipated Bretton Woods II. As I write this they are getting underway in New Hampshire, at the Bretton Woods hotel, and will be convening for three days. [1.] This meeting is expected to be a major shift in world economic policy, reorganizing the world economy drastically. In his famous 2009 article, No Alternative To A New World Architecture[2.] George Soros wrote: The former, represented by the United States, has broken down, and the latter, represented by China, is on the rise. Following the path of least resistance will lead to the gradual disintegration of the international financial system. A new multilateral system based on sounder principles must be invented. While international cooperation on regulatory reform is difficult to achieve on a piecemeal basis, it may be attainable in a grand bargain that rearranges the entire financial order. [2.] And that is exactly what this new Bretton Woods conference is: a rearrangement of the entire financial order. But what might that New World Architecture look like? Well, to understand what is happening today, and why you should care, lets review a little history on Bretton Woods. ORIGINAL BRETTON WOODS AGREEMENT When Bretton Woods first convened in July 1944, as WWII was still raging, they sought to negotiate a new monetary system for the world. It was at this same Bretton Woods conference that the International Bank for Reconstruction and Development (IBRD, now part of the World Bank Group), and the International Monetary Fund (IMF) were created. The main articles of the Articles of Agreement of the International Monetary Fund, 1944 fixed the rate of currencies to the dollar, with exchange rates being subject to IMF initiation and approval. Needles to say, this was a major compromise to the sovereignty of signing nations. The market and a countrys national economy no longer determined the fluctuation of exchange rates, but rather an international agency; the IMF. This fixed exchange system lasted for 25 years, eventually yielding to predictable economic forces. The development of the international market was pulling currency away from individual nation states. As the new Euro-

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By Sam Feliciano

Dollar economy surfaced, the old order of national currencies stuttered. This led to a crisis, which was as predictable as gravity. SPECIAL DRAWING RIGHTS (SDRs) Because of a Silver crisis [4.] that was connected to the growing international Euro-Dollar economy [5.], the IMF decided in 1969 to create their own fiat assets: Special Drawing Rights, or SDRs. This was held fixed relative to gold at the amount the dollar was worth in 1944. This move would prove to be prophetic when, conveniently, the dollar was no longer trustworthy only two years later. An SDR is basically an IMF currency exchange bond, but it can only be redeemed for a participating national currency. It cannot be traded for goods and services, and therefore is not a currency (although it can be traded for currencies and then currencies traded for goods and services.) The SDR no longer has a constant rate to gold, but has a rate to other participating currencies. The way that the IMF uses SDRs is mainly in its business dealings with member nations as a fiat asset. Instead of paying a quota to the IMF, members are now required to purchase SDRs in order to pay any outstanding imbalances in their quotas, and vice versa. As can be seen in the original Articles of Agreement of the International Monetary Fund, 1944 [3.], each of the members were assigned a quota, which they were expected to pay AT LEAST 25% of which in Gold, and the remainder in their home currency: ARTICLES OF AGREEMENT OF THE INTERNATIONAL MONETARY FUND, 1944: The United Nations Monetary and Financial Conference held at Bretton Woods during July 1944 concluded with the creation of the IMF. These excerpts contain the major articles dealing with the objectives and obligations of the members as well as the articles relating to the relationship between gold, the dollar, and other member currencies ARTICLE III. QUOTAS AND SUBSCRIPTIONS: SECTION 1. Quotas. -Each member shall be assigned a quota. The quotas of the members represented at the United Nations Monetary and Financial Conference which accept membership before the date specified in Article XX, Section 2 (e), shall be those set forth in Schedule A. The quotas of other members shall be determined by the Fund. SEC. 3. Subscriptions: time, place, and form of payment. (a) The subscription of each member shall be equal to its quota and shall be paid in full to the Fund at the appropriate depository on or before the date when the member becomes eligible under Article XX, Section 4 (c) or (d), to buy currencies from the Fund. (b) Each member shall pay in gold, as a minimum, the smaller of (i) twenty-five percent of its quota; or (ii) ten percent of its net official holdings of gold and United States dollars as at the date when the Fund notifies members under Article XX, Section 4 (a) that it will shortly be in a position to begin exchange transactions.

Each member shall furnish to the Fund the data necessary to determine its net official holdings of gold and United States dollars. (c) Each member shall pay the balance of its quota in its own currency. (d) If the net official holdings of gold and United States dollars of any member as at the date referred to in (b) (ii) above are not ascertainable because its territories have been occupied by the enemy, the Fund shall fix an appropriate alternative date for determining such holdings. If such date is later than that on which the country becomes eligible under Article XX, Section 4 (c) or (d), to buy currencies from the Fund, the Fund and the member shall agree on a provisional gold payment to be made under (b) above, and the balance of the members subscription shall be paid in the members currency, subject to appropriate adjustment between the member and the Fund when the net official holdings have been ascertained. [3.] As you can see, these quota amounts were determined and imposed solely by the IMF. During the 60s, The Vietnam War along with increased US investment abroad caused the US to ask for money from the Federal Reserve, which it happily printed. Because there were more dollars printed in the world, inflation ensued. This is how recessions and booms happen. Inflation is directly tied to the amount of a given currency available. In August of 1971, Nixon made the historic announcement that the Dollar would no longer be directly exchangeable for gold. [6.] A shockwave was sent through the global economy. Because the law provided that each nations currency maintain its exchange rate relative to the dollar, this required a major change in the structure of the Bretton Woods Agreement. What developed was a free floating exchange rate subject to market forces, rather than the IMF. [5.] A whole new Bretton Woods emerged. SDRs were implemented more and more. In addition, trade restrictions were lifted, leading to a free-market 80s. Personally, I believe in the free-market, but when I say that I mean a free market for you and me and anyone else to have the freedoms to develop the businesses we want, and have the opportunity to be as successful as possible. That is not the free-market promoted by the UN in the 80s, which nurtured an environment of corporate supremacy over individual rights and enterprise, and financial speculation instead of investment. This climate continued on into the 90s and up to today. American finance once again became the backbone of the economy. However, as we have seen, the financial boom was an illusion created by the widespread abuse of real estate and financial markets. As the sub-prime mortgage crisis emerged in the 21stcentury, the thriving super economy revealed itself to be based on little more than speculative equity, greed, and dishonesty. [7.] WORLD CURRENCY = WORLD ECONOMIC ORDER = WORLD GOVERNMENT

As we all know, whoever controls a countrys currency, controls that country. It doesnt matter who buys what or where; as long as the money needed to purchase an item must itself also be purchased, whoever owns the dollar is going to make a profit on every dollar spent. The move to create the World Bank and IMF was a very successful push to control the countries of the world by their financial foundation. In the revised Articles of Agreement of the IMF [8.]: Article III Quotas and Subscriptions Section 1. Quotas and payment of subscriptions Each member shall be assigned a quota expressed in special drawing rights. The quotas of the members represented at the United Nations Monetary and Financial Conference which accept membership before December 31, 1945 shall be those set forth in Schedule A. The quotas of other members shall be determined by the Board of Governors. The subscription of each member shall be equal to its quota and shall be paid in full to the Fund at the appropriate depository. [9.] Today, these quotas are implemented through SDRs. On the IMF website, they exclaim very clearly that: The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. [10.] That means that it can be redeemed for any currency available to the SDR, but it cannot be redeemed with the IMF for anything! The IMF never holds money on the behalf of others. They dont hold funds for anyone; they just make loans to governments, and thereby purchase their economies. As far as I can tell, we are just expected to pay them for nothing. George Soros said in the 2009 article regarding the SDR: In addition, a new Bretton Woods would have to reform the currency system. The postwar order, which made the U.S. more equal than others, produced dangerous imbalances. The dollar no longer enjoys the trust and confidence that it once did, yet no other currency can take its place. The U.S. ought not to shy away from wider use of IMF Special Drawing Rights. Because SDRs are denominated in several national currencies, no single currency would enjoy an unfair advantage. The range of currencies included in the SDRs would have to be widened even if some of the newly added currencies, including the renminbi, are not fully convertible. This would let the international community press China to abandon its exchange-rate peg to the dollar and be the best way to reduce international imbalances. The dollar could still remain the preferred reserve currency, provided it is prudently managed. One great advantage of SDRs is that they permit the international creation of money, which is particularly useful at times as now. The money could be directed to where it is most needed. A mechanism that allows rich countries that dont need additional reserves to transfer their allocations to those that do is readily available, using the IMFs gold reserves. [2.]

It actually kind of reminds me of a pyramid scheme: Buy this case of SDRs from us in with all your cash, and YOURE IN! You wont be able to return them and get your money back, but dont worry. This is the new thing! Theyll be everywhere soon. You will want to be in on this! And then you will be able to trade it with other people, and well all make money! Then they sell it to two friends, and they sell, and somehow, somebody gets a Ferrari Starting to see what Im getting at? It is very likely that the SDRs application will be widened to a form of currency, at least in International markets. It seems clear that whatever it is called, a new global currency will soon reveal itself to us. THE GOLD STANDARD & FIAT MONEY Gold has always had monetary value since the beginning of recorded history. As they say, an ounce of gold will get you the same amount of bread 500 years ago as it will 500 years from now. Does that mean we should go back to the Gold standard? Absolutely not! The Gold standard does not work because it makes currency scarce and inflexible. This creates an economic environment where the only people who can get ahead are the very wealthy or the very lucky. The Gold standard does not prosper. Gold will always have real market value, but the market works out exchange rates naturally. The most prosperous system is a flexible system; free-market combined with government issued fiat money. [11.] Fiat money is defined as: A medium of exchange such as a coin which is accepted at a face value which is greater than its intrinsic value as a result of backing by the issuing authority (usually government). [12.] Any money declared by a government to be legal tender. [13.] Let me be clear that I am not promoting that we go to a fiat money system. We are already ON a fiat money system under the private corporation known as the Federal Reserve. The constitutional right of congress to coin money is clearly outlined in Article 1, Section 8 of the Constitution, The Powers Of Congress as follows: Section 8 Powers of Congress: The Congress shall have Power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; To provide for the Punishment of counterfeiting the Securities and current Coin of the United States; [14.] Coin is defined as such: An object, usually metal, marked in some recognized way and issued by a governing authority for the purpose of acting as money an agreed and accepted medium of exchange. [12.] As we can all see, Congress clearly has the power to create an object marked in some recognized way and issued by a governing authority for the

purpose of acting as an agreed and accepted medium of exchange; fiat money. This can be copper coins, silver coins, gold coins, or even dollars. Congress can choose to make those coins equal to the intrinsic value of the medium of exchange (weight), or it can just mark it as a given value out of government fiat just like the Federal Reserve does with that worthless green monopoly money we all carry around. If we wanted to ask President Obama to order Congress to print a new series of greenbacks and coinage to supplement the Federal Reserve Notes, we would be well within our rights to do so. ESPECIALLY since as it stands right now, ALL of the money that we receive from the Fed as printed bills comes at a cost. If our Congress was doing its job, we would at least have ONE additional currency in the system that was there because Congress coined it. If we had any constitutionally issued money, it would be mingled into our economy at little or no cost to our government, our deficit, our taxes, or our children. Hmm The system of using real market value coinage in conjunction with government printed fiat currency has been a successful monetary system everywhere it has been tried, including here. As we all know, Kennedy ordered Congress to coin money with Executive Order No. 11110. In addition, Lincolns greenbacks were famously one of the most stable units of currency in American history, long after they were no longer printed. The key to the power of a mixed market is in its flexibility. As in all free markets, supply and demand will guide production costs and prices up and down, as needs and availability fluctuate. Under our current Federal Reserve System, if there is a recession, somebody has to go beg the Fed chairman to print more money (at interest), and he has no responsibility to even listen to anyone, even the President. In stark contrast to this is the spirit and economic liberty envisioned by our forefathers. The truth is, if there is a recession, all we have to do is ask our Congress to coin more money, just like our government asks the Fed to coin money. Congress, of course, can deliberate and say no thats their jurisdiction. However, the main difference is that if there were a government-issued, debt-free currency available, it would come to us at little or no cost to the government or the people. As it stands now, we have no choice anyway. CONCLUSION If the UN financial branches have their way, we will have a one world economic order, which is synonymous with one world government. The fact that they manipulate financial tragedies to so consistently work out in their favor shows that they are only interested in one thing: power over all aspects of world finance. If they are permitted to succeed, it will be economic slavery. I know that there are many factors in an economic system, but from what I understand; inflation is directly tied to the amount of a given currency available in the world. When a country can print and control its own

currency, this process is easily monitored because money can be printed or burned for free. As it stands right now, the Federal Reserve loans every dollar to our Government with interest. Ultimately, the only logical result is default. Because we are having our money printed for us with interest by the Federal Reserve, we are paying for every dollar that has ever been in circulation, burned or not. Pay close attention in the coming week. Whatever the new economic order reveals, we should all be as alert and as thoughtful of the scope of its proposals as we can. Notice that there is little room to breathe in the legal language used thus far. I am sure we can count on more of the same. 1.) http://ineteconomics.org/initiatives/conferences/bretton-woods 2.) http://search.japantimes.co.jp/cgi-bin/eo20091108a1.html 3.) http://www2.econ.iastate.edu/classes/econ355/choi/1944jul22.html 4.) http://www.nber.org/papers/w14657.pdf silver 5.) http://internationalecon.com/Finance/Fch100/F100-1.php 6.) http://www.24hgold.com/english/contributor.aspx?contributor=History %20of%20Gold&article=803452874G10020 7.) http://useconomy.about.com/od/criticalssues/tp/Subprime-MortgageCrisis-Cause.htm 8.) http://www.imf.org/external/pubs/ft/aa/index.htm 9.) http://www.imf.org/external/pubs/ft/aa/aa03.htm#1 10.) http://www.imf.org/external/np/exr/facts/sdr.htm 11.) http://www.youtube.com/watch?v=7qIhDdST27g 12.) http://www.australianstamp.com/coin-web/history/glossary.htm 13.) http://en.wikipedia.org/wiki/Fiat_money 14.) Ibid; http://www.usconstitution.net/const.html#Am7