From Bretton Woods to Banking Crises w/Alasdair McLeod

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In this week’s Off The Cuff interview, Alsadair McLeod and I dive into the topic of Bretton Woods, a financial mechanism that, for a time, seemed as unbreakable as Fort Knox. Initially, the U.S. was sitting atop a mountain of gold, roughly 26,000 tonnes if memory serves. This stockpile not only instilled confidence, but it was the bedrock of global finance.

Yet, as with all things, human mismanagement took its toll.

Wars, from Korea to Vietnam, alongside trade deficits, particularly with a booming Germany, saw the US’s gold reserves dwindle. The London Gold Pool of the 1960s, established as a lifeline for the dollar, eventually succumbed to the same pressures. Notably, France grew weary of the dollar’s hegemony, signaling a preference for tangible gold over the greenback. This cascade of events culminated in a crisis in 1971 when the U.S. gold reserve plummeted to a mere 8,500 tonnes, prompting President Nixon to ‘temporarily’ suspend the Bretton Woods agreement. It remains suspended to this day.

Fast forward to the present, the global fiscal landscape is once again shifting. Excessive government spending and soaring debt-to-GDP ratios have cast a shadow on the longevity of fiat currencies. Many argue we’re on the precipice of another significant financial reset. In the face of these challenges, the proposed solutions, from central bank digital currencies to fiscal austerity, remain contentious. While the path forward is murky, one thing is clear: the lessons of Bretton Woods, its rise, and eventual decline, serve as a stark reminder of the cyclical nature of financial systems and the delicate balance on which they hinge.

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This is a companion discussion topic for the original entry at https://peakprosperity.com/from-bretton-woods-to-banking-crises-w-alasdair-mcleod/

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Oh My Dear Goodness

Can’t wait for Chris to digest this and translate into commoner. It seems later than we thought.

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Okay on my second time through i have 2 questions…

  1. Alistair said a currency takes about 6-8 months to crash. From when. He says thati it might be in the next months. Does that mean it is in progress in earnest?
  2. How predictive has Alistair’s previous predictions been?
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Government Deficit Spending = Gdp

Gundlach has opined that if the government stops deficit spending then GDP would go to zero or even negative. Then there’s the little problem that the debt can never be paid back because there is more debt than currency.

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2010 McLeod: all the gold of HBU (dutch bank) is gone.
Jim Sinclair: it’s already too late. RIP - goldbugs don’t live longer.
#fearmongering

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How predictive? Not. -like Kyle Bass about China :wink:

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Finding People With A Big Enough Piece Of The Truth

Great to see Alisdair back on the site. He has a tremendous depth of financial /economic / geopolitical knowledge.
And it is true that he is not always right in his predictions. He tends to be early.
It has been said that no one is always right and everyone has a piece of the truth. The key, in my view, is to find people with a big enough piece of the truth to be worthwhile listening to. Which is why I belong here and value conversations like this one.

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What We Need More Of

We need more smart, intelligent people like Alisdair and Chris spending less time thinking about what is happening, what SHOULD happen and how we can respond, and more time thinking about how the power brokers are thinking and what they might do. Then we could strategize how we might respond to what they might do, instead of strategizing how to respond if things unfold the way they SHOULD unfold (as logic would dictate).
For example, think back to 2006 - 2008. Remember the movie “The Big Short?”Some investors and analysts saw clearly what was happening with housing (and the mortgage bond funds) and positioned themselves to profit when the whole house of cards collapsed. But they weren’t cynical ENOUGH and didn’t try seeing things from the perspective of the big banks and the rating agencies. It never occurred to them that banks would carry the bonds on their books at full value even though they were clearly trash and that the rating agencies would refuse to downgrade the bond funds and the banks UNTIL the big boys had sold off their positions to a bunch of suckers and took the other side of the trade with Michael Burry, et al.
More “Devil’s Advocate.” Less rational analysis. Of course this will be difficult for people who aren’t well accustomed to lying, stealing and cheating regardless of the costs to innocent people and society at large. Surely there are some people in white collar prison for financial crimes we could recruit for interviews and analysis of what the wealthy and powerful unscrupulous crowd might be up to. They should have a good idea.

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I like your thinking. For example instead of playing with stock ideas, maybe listening to Jim rickards discussions where he describes an ice-9 scenario. Basically like, oops a financial accident, markets are now ‘temporarily’ closed until further notice.
Also, instead of which bank to put our money in, we should spend some time looking into what it will be like WHEN not if, bail-ins are enacted. Banking laws for depositors changed in EU, UK on 1st Jan 2016. Also changed to bail-in for aus, us, can and other countries. Depositors became ‘unsecured creditors’

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China is collapsing. The problem is too many western entities will be destroyed by that, so they obfuscate and hide the reality. The markets are rigged and algo-driven, because if logic was allowed to rule, the equity markets would already have collapsed. Fractional reserve banking CAN’T function with actual deflation. So if that collapse occurs, so does the global energy economy, then global famine. They have to prop it up and steal from the middle/lower classes via inflation in order to string us all along until the birth rates have collapsed enough so that we have a “sustainable” (perceived mind you) number of humans globally.

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Fascinating, Crucial, Deep

I wish I had time to follow my hunch more that this analysis is the most important to understand among pretty much all deep dives I’ve digested over years.

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Great

Among all the deep dives I’ve taken over the years, I wish I had more time to pursue my intuition that this analysis is the most important to comprehend. mini crossword