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French warship sails into New York harbour to take back national reserves of gold, 1971
US push for world financial mastery in 1944 leads to US financial crisis in 1964
By 1964 post-war prosperity was evaporating because of insurmountable international problems with the dollar.
It was so bad, in August 1971 French president Georges Pompidou would send his war ship Océan to New York take the French national reserves of gold back to Paris.
Maynard Keynes was dead and unable to solve the international money crisis he predicted when the US got their way at Bretton Woods in 1944 - making the US dollar the standard against which all other currencies would be valued. Not gold.
At Bretton Woods, Keynes had proposed instead ‘bancor’ - a virtual currency – to be maintained by a new World Bank and a new International Monetary Fund. But Harry Dexter White of the US Treasury used his country’s post-war financial superiority to fix the supremacy of the dollar, which he believed would give the US mastery over everyone else in perpetuity. It was a repeat of 1919. And it was just as disastrous for the US as well as for everyone else.
By 1964 president Lyndon Johnson could see his ambitious scheme to end poverty evaporating... According to the advice Johnson was given, the quick solution was to go to war.
It made sense. After all, one of the strengths of the American economy had been military spending in two world wars, and when there were no world wars, finding ‘reasons for going to war against peasant revolutionary movements’, as economist Daniel Fusfield put it in 1972.
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U.S. army helicopters machine gun a tree line to cover the advance of South Vietnamese ground troops, March 1965. Between 1.5 and 3.6 million people were killed in the war
The war that Johnson now chose to fight was, of course, in Vietnam
Historian Erik Devereux has shown that, by 1964, with the US economy struggling, a conventional war seemed to offer the possibility of lucrative contracts to carmakers, aerospace, steel and other metals, textiles and shoes and rubber, besides weapons manufacturers themselves. It would keep wages up for working people
But, as we all know, the American war in Vietnam went badly wrong. Exactly how and why perhaps we can come back to one day. [Jon thinks it has a lot to do with helicopters….] But it was not just a military miscalculation. As Devereux shows, spending on the war did create many jobs. But it also made inflation – already a problem because of the careering decline of the Bretton Woods dollar – much worse.
Between 1966 and 1973, far from cashing in on the war, American businesses saw their profits fall.
And that, of course, was just the tip of the iceberg. There began to be an awful procession of young men who were drafted and sent to Vietnam but did not return.
Anti-Vietnam war protest, Washington Monument, April 17, 1965. The rally followed picketing of the White House.
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The end of the world as we know it
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