Steps to the Mark: (3) Step 1. Discredit the Old System.

[Marilyn C]

STEP 1. Discredit the Old System.

Need of a New Frame Work.

Many economists believe that the present global financial system needs a major reform. In 2014 the UN, (United Nations) World Bank and IMF, (International Monetary Fund), held high-level discussions about `the new framework for the global financial and economic system.

Jean-Claude Trichet, the former president of the ECB, (European Central Bank) told the forum that `New rules have been discussed not only inside advanced economies, but with all emerging economies..` This was later confirmed by a high-ranking executive of China`s largest bank, (ICBC), “With the status of the U.S. dollar as the international reserve currency being shaky a new global currency setup is being conceived.”

HISTORY

1944 After WW2.

The last monetary reset of the `global financial order,` was executed in 1944, at the end of WW2, when the U.S. invited 44 countries to the Bretton Woods conference. The U.S. proposed a new monetary system centred on the U.S. dollar, which would be backed by gold. The U.S. convinced the European countries with the promise that paper dollars could always be exchanged for gold. This promise was the only reason the Europeans accepted the American plan.





However, when the U.S. started to print large amounts of dollars in the 1960`s to finance the Vietnam war, more and more countries became nervous about the future value of the dollar and started to exchange surplus dollars for gold. In just a few years, the U.S. lost half of their 20,000 tonnes gold reserves.

 

[Marilyn C]

1971 Not backed by Gold.

This was a drain to the U.S. and in the summer of 1971, President Nixon therefore refused to exchange hundreds of millions of dollars from the Bank of England for gold. He decided to `close the gold window.`

This decision is seen as a U.S. default, since it no longer could fulfil its 1944 obligations. Since 1971 the U.S. dollar although held by most countries for trade purposes, has been backed by `nothing,` just America`s promise to pay yet with more unbacked dollars. This has seen America being able to purchase goods from all over the world and in return just pay with `paper.`




Over time countries are beginning to wake up to this and start to trade with other countries in their currency. For example, China and Russia use each other`s currency, and many other nations do the same. Thus the U.S. dollars are coming home to America and the time of living high is now turning to reality of having to pay their debts.



2007/8 Global Financial Crisis. (GFC)

Also, as most of the nations of the world are in some way connected to the American dollar, then the whole economic system is subject to highs and lows. This we have recently seen in the 2007/8 Global Financial Crisis. However instead of letting the markets adjust, the governments printed more currency and made the `debt bubble` grow exponentially larger. And finally in 2020 the printing presses, (actually digital) have been running hot to fend off the gigantic collapse of the whole global economic & financial system.