SUNDAY August 15 marked the 50th Anniversary of the collapse of the Bretton Woods Agreement which shattered any illusions about the ability of world capitalism to achieve stability.
The Bretton Woods Agreement was signed at a conference of 44 nations at Bretton Woods in New Hampshire in July 1944, with the explicit intention of creating a world system to rescue capitalism and rebuild the shattered economies of the West following WWII.
The driving force behind the agreement, and the unity of the countries involved, was the fear of a revolutionary working class that emerged from a war that had cost the lives of hundreds of millions of workers and was not prepared to return to the conditions of the 1930s and the world capitalist recession that had dominated in that period.
It was an attempt to stabilise world capitalism, prevent revolution at home, and create the conditions under which imperialism could thrive and pursue a Cold War against the Soviet Union.
This stability was to be achieved by establishing a series of international agencies that would artificially stimulate the post-war economy through inflationary measures.
It established the International Monetary Fund (IMF) which was set up to provide a pool of money to bail out any country drowning in debt and so prevent state bankruptcy from spreading across the world.
Central to the agreement, was the fixing of the price of gold at $35 to an ounce of gold.
By aligning itself with gold, the only real repository of value, the dollar became the main reserve asset for the world with every currency aligned through the dollar with gold itself.
Despite the US holding the majority of the world’s gold in its vaults, it still amounted to a very tiny amount compared to the vast inverted pyramid of paper dollars that the US printed under the boast that the dollar was ‘as good as gold’.
This came crashing down in the late 1960s when European governments, led by France, started to question the convertibility of dollars into gold and demanded gold in return for the billions of dollars they held.
It was finally ended on August 15 1971, when US president Richard Nixon was forced to end the convertibility of dollars into gold.
This ushered in the present period where paper money has absolutely no relationship to any real value.
Since the ending of dollar convertibility, the US dollar has still remained the capitalist world’s main reserve currency for all international trade and finances, but it has done so without the backing of any real value – that is gold.
This has led to a vast expansion of credit internationally, paper credit that has absolutely nothing to back it up.
When a vast credit turns into debt then it becomes only too apparent that paper money, without any gold to back it, is worthless.
As the quantity of dollars was no longer linked to the American gold reserves, it became possible to print more and more of them.
This has been the only remedy for capitalism to survive after 1971 – to try and print their way out of crisis and, in the process, accumulate a massive debt mountain of worthless paper money.
This has reached a historic level with the adoption by all the capitalist central banks of Quantitative Easing (QE) in order to hold off the world banking crash of 2008, and, more recently, to prevent the banks and industry collapsing during the Covid pandemic.
In the face of this massive debt crisis, capitalism can no longer rely on the strength of the US economy to bail out the rest of the world.
On the contrary, the US Federal Reserve Bank has a debt mountain of £20 trillion while the US national debt stands at over $28.17 trillion – over 105% of the country’s entire Gross Domestic Product.
There can be no return to stability for capitalism – as promised by Bretton Woods. The only future for capitalism is to try and make the working class pay for its crisis.
For the working class, the only way to resolve the crisis is to take power to overthrow capitalism with the world socialist revolution.