The mechanics of consumer markets and the manipulative tools for social transformation

Nations were required to accept holding SDRs equal to three times their allotment, and
interest would be charged, or credited, to each nation based on their SDR holding. The
original interest rate was set at 1.5%.

The intent of the SDR system was to prevent nations from buying pegged dollars and
selling them at the higher free market price, and give nations a reason to hold dollars, by
crediting interest, at the same time, set a clear limit to the amount of dollars which could
be held.

The essential conflict was that the American role as military defender of the capitalist
world's economic system was recognized, but not given a specific monetary value. In
effect, other nations "purchased" American defense policy by taking a loss in holding
dollars. They were only willing to do this as long as they supported U.S. military policy,
because of the Vietnam war and other unpopular actions, the pro-U.S. consensus began
to evaporate. The SDR agreement, in effect, monetized the value of this relationship, but
did not create a market for it.

The use of SDRs as "paper gold" seemed to offer a way to balance the system, turning
the IMF, rather than the U.S., into the world's central banker. The US tightened controls
over foreign investment and currency, including mandatory investment controls in 1968.
In 1970, U.S. President Richard Nixon lifted import quotas on oil in an attempt to
reduce energy costs; instead, however, this exacerbated dollar flight, and created pressure
from petro-dollars.

Still, the United States continued to draw down reserves. In 1971 it had a reserve deficit
of $56 Billion dollars; as well, it had depleted most of its non-gold reserves and had only
22% gold coverage of foreign reserves. In short, the dollar was tremendously overvalued
with respect to gold.

The "Nixon Shock"

By the early 1970s, as the Vietnam War accelerated inflation, the United States as a whole
were running not just a balance of payments deficit, but also a trade deficit (for the first
time in the twentieth century). The crucial turning point was 1970, which saw U.S. gold
coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists,
represented the point where holders of the dollar had lost faith in the ability of the U.S.
to cut budget and trade deficits.






















101

In 1971 more and more dollars were being printed in Washington, then being pumped
overseas, to pay for the government's military expenditures and private investments. In
the first six months of 1971, assets for $22 billion fled the United States. In response, on
August 15, 1971, Nixon unilaterally imposed 90-day wage and price controls, a 10%
import surcharge, and most importantly "closed(ing) the gold window," making the
dollar inconvertible to gold directly, except on the open market.

Unusually, this decision was made without consulting members of the international
monetary system or even with his own State Department, and was soon dubbed the
"Nixon Shock".

The surcharge was dropped in December 1971 as part of a general revaluation of major
currencies, which were henceforth allowed 2.25 % devaluations from the agreed
exchange rate. But even the more flexible official rates could not be defended against the
speculators. By March 1976, all the major currencies were floating—in other words:
exchange rates were no longer the principal target used by governments to administer
monetary policy.

The Smithsonian Agreement

The shock of August 15 was followed by efforts under U.S. leadership to develop a new
system of international monetary management. Throughout the fall of 1971, there was a
series of multilateral and bilateral negotiations of the Group of Ten seeking to develop a
new multilateral monetary system.

In December of 1971, on the 17th and 18th, the Group of Ten, meeting in the
Smithsonian Institute in Washington, created the Smithsonian Agreement which
devalued the dollar to $38 dollars an ounce, with 2.25% trading bands, and attempted to
balance the world financial system using SDRs alone. It was criticized at the time, and
was by design a "temporary" agreement.

It failed to impose discipline on the US government, and with no other credibility
mechanism in place, the pressure against the dollar in gold continued.





























102

This resulted in gold becoming a floating asset, and in 1971 it reached $44.20/ounce, in
1972 $70.30/ounce and still climbing. By 1972, currencies began abandoning even this
devalued peg against the dollar, though it would take a decade for all of the industrialized
nations to do so.

In February of 1973, the Bretton Woods currency exchange markets would close, after a
last gasp devaluation of the dollar to $44/ounce, and only would reopen in March in a
floating currency regime.






































































103

Conclusions

The collapse of the Bretton Woods system is a subject of intense debate.

There are a variety of theories as to why it did so, ranging from the budget deficit
problems, to the Vietnam War, to marginal tax rates.

The fundamental point of agreement is that the United States ran an increasing balance
of trade deficit, and that, in the end, it could not establish credibility on reining this
deficit in.

This would lead to the study in economics of credibility as a separate field, and to the
prominence of "open" macroeconomic models.

Notes and references


List of international trade topics
Balance of trade
Balance of payments
Floating currency
General Agreement on Tariffs and Trade
Global financial system
Globalization
Gold standard
International Monetary Fund
Neoliberalism
Pax Americana
Trifflin's Dilemma
Washington Consensus
World Bank
The Gold Battles Within the Cold War (PDF) by Francis J. Gavin (2002)
[http://www.polsci.ucsb.edu/faculty/cohen/inpress/bretton.html





























104

APPENDIX 7 The Annihilation of the Native Americans


The number of Indians who died at the hands of the European invaders is highly
debatable, and it basically centers on two questions:


1. How many people lived in America before the population plummeted?
2. How many of the deaths during the plummeting can be blamed on human
cruelty?


Pre-Columbian Population:

Pick a number, any number. Sometimes it seems that this is the way historians decide
how many Indians lived in the Americas before the European Contact. As The New York
Public Library American History Desk Reference puts it, "Estimates of the Native American
population of the Americas, all completely unscientific, range from 15 to 60 million."
And even this cynical assessment is wrong. The estimates range from 8 to 145 million.

Population of the Western Hemisphere in 1492 according to various experts:
































The problem, of course, is that by the time that the Europeans got around to counting
the Indians, there were a lot fewer to count

I've graphed the estimates chronologically to show that the passage of time and the
gathering of more information is still not leading toward a consensus. Over the past 75
years, estimates have bounced around wildly and ended up right back where they started;
around 40 million.


I've also graphed the population of Europe in 1500 because this is magic number to
which many of the estimates aspire. Native American history is traditionally treated as
marginal, a handful of primitive Kingdoms that were easily overwhelmed by the most


105

dynamic civilization on Earth, but if it could somehow be proven that the Americas had
even more people than Europe, then history would be turned upside down.

The European conquest could be treated as the tail wagging the dog, like the Barbarian
invasions of Rome, a small fringe of savages descending on the civilized world, wiping
out or enslaving the bulk of humanity.

The advocates of large numbers, however, are often their own worst enemies. On page
33 of American Holocaust, David Stannard declares, "Probably about 25,000,000 people, or
about seven times the number living in all of England, were residing in and around the
great Valley of Mexico at the time of Columbus's arrival in the New World".


Now, I've been to England, and I can vouch that the English have left their mark on the
land. You can't throw a brick in England without hitting some relic of the earlier
inhabitants -- castles, cathedrals, Roman walls and roads, Stonehenge, etc. - not to
mention books, tools, coins, weapons and all the little pieces of the past that turn up
anytime someone plows a field or cleans their attic.


Now go back and read what Stannard has written. I'm sure that the point that he's trying
to make is that since there were seven times as many Mexicans as English, truly the
Mexicans were seven times more civilized than the English, so if anyone deserved to be
called "savages", it's the English. Unfortunately, the point that nags at me is "If there
were seven times as many people in Mexico, shouldn't there be seven times as many
relics in Mexico?" Yes, I've read the archaeological reports that discuss irrigation systems,
and I've seen the big, colorful picture books showing jungle-encrusted ruins of ancient
pyramids, but the fact is that seven times the population of England should have left
behind a lot more stuff than that.


I find the estimates for Virginia even more awkward because I live here. Stannard
estimates the population of Powhatan's Confederation at 100,000, yet there's not a single
site in the Virginia Tidewater that remotely hints at the complex infrastructure necessary
to support even half this number. There's not one ruin of any permanent building.
Artifacts of any kind are rare -- barely even a single burial mound worth pilfering. And
it's not like there's some forgotten ghost town deep in the desert or jungle waiting to be
discovered. This is Virginia. It's been settled, plowed and excavated for 400 years.

I also find it difficult to believe that the Europeans obliterated all traces of the earlier
inhabitants. After all, I've been to Germany too. I've seen that bombed-out cities still
have a substantial presence of the past, and I doubt that the conquistadores could be
more destructive than a flock of B-17s.


In any case, the median of all the estimates charted above is 40 million. It's the type of
number that half the experts would consider impossibly big, and the other half would
consider impossibly low, so it's probably exactly right.


And then, within a century of the European Contact, the hemispheric population
plunged to a fairly well-proven residue of less than 10 million. How many of these deaths
count as indictable atrocities?






106

The Death Toll:

In American Holocaust, Stannard estimates the total cost of the near-extermination of the
American Indians as 100,000,000.


The problem here (aside from the question of whether there were even this many people
in hemisphere at all) is that Stannard doesn't differentiate between death by massacre and
death by disease. He blames the Europeans for bringing new diseases which spread like
wildfire -- often faster than than the Europeans themselves -- and depopulated the
continent. Since no one disputes the fact that most of the native deaths were caused by
alien diseases to which they had never developed immunity, the simple question of
categorization is vital.

Traditionally we add death by disease and famine into the total cost of wars and
massacres (Anne Frank, after all, died of typhus, not Zyklon-B, but she's still a victim of
the Holocaust) so I don't see any problem with doing the same with the American
genocides, provided that the deaths occurred after their society had already been
disrupted by direct European hostility. If a tribe was enslaved or driven off its lands, the
associated increase in deaths by disease would definitely count toward the atrocity (The
chain of events which reduced the Indian population of California from 85,000 in 1852
to 18,000 in 1890 certainly counts regardless of the exact agent of death, because by this
time, the Indians were being hunted down from one end of California to another.);
however, if a tribe was merely sneezed on by the wrong person at first contact, it should
not count.


Consider the Powhatans of Virginia. As I mentioned earlier, Stannard cites estimates that
the population was 100,000 before contact. In the same paragraph, he states that
European depredations and disease had reduced this population to a mere 14,000 by the
time the English settled Jamestown in 1607. Now, come on; should we really blame the
English for 86,000 deaths that occured before they even arrived? Sure, he hints at pre-
Jamestown "depredations", but he doesn't actually list any. As far as I can tell, the
handful of European ventures into the Chesapeake region before 1607 were too small to
do much depredating, and in what conflicts there were, the Europeans often got the
worst of it. [see

http://www.mariner.org/baylink/span.html and
http://www.nps.gov/fora/roanokerev.htm and
http://coastalguide.com/packet/lostcolony01.htm]

Think of it this way: if the Europeans had arrived with the most benign intentions and
behaved like perfect guests, or for that matter, if Aztec sailors had been the ones to
discover Europe instead of vice versa, then the Indians would still have been exposed to
unfamiliar diseases and the population would still have been scythed by massive
epidemics, but we'd just lump it into the same category as the Black Death, i.e. bad luck.
(Curiously, the Black Death was brought to Europe by the Mongols. Should we blame
them for it? And while we're tossing blame around willy-nilly, aren't the Native
Americans responsible for introducing tobacco to the world -- and for the 90 million
deaths which followed?)






107

Other Guesses:

 M. D. Aletheia, The Rationalist's Manual (1897): 30,000,000 Mexicans and
Peruvians were slaughtered.
 David Barrett, World Christian Trends: Conquistadors killed 15M Amerindians
 Coe, Snow and Benson, Atlas of Ancient America (1986)
o Total pre-Columbian population: 40M
o Mexico: Original population of 11M to 25M ("lower figure commands
more support") fell to 1.25M (1625)
o Peru: Pop. fell from 9M (1533) to >500,000 (early 17th C)
o Brazil: Original population of 2.5M to 5.0M ("recent commentators
favoring the higher") fell to 1M
 Massimo Livi-Bacci, Concise History of World Population History 2d (1996)
o Mexico: Population fell from 6.3M (1548) to 1.9M (1580) to 1M (1605)
o Peru: Pop. fell from 1.3M (1572) to 600,000 (1620)
o Canada: from 300,000 (ca. 1600) to < 100,000 (ca. 1800)
o USA: from 5M (1500) to 60,000 (ca. 1800) [sic. Probably means 600,000
because he cites .J. Rummel estimates that 13,778,000 American Indians
died of democide in the 16th through 19th Centuries:
o Total dead among native Americans in colonial era: 49.5M out of pre-
contact population of 55M
 Democides in this: 5M
o Democides among Indians, post-colonial era: 8,763,000
o Democides in US: 15,000
 Skidmore & Smith, Modern Latin America (1997)
o Mexico: Population fell from 25M (1519) to 16.8M (1523) to 1.9M (1580)
to 1M (1605)
o Peru: from 1.3M (1570, forty years after Conquest) to <600,000 (1620)



Stannard, American Holocaust (1992): 100,000,000 deaths across the hemisphere across
time

o 16th Century death toll: between 60M and 80M
 Panama, 1514-1530: 2M Indians killed
 Mexico
 Central: Population fell from 25.0M (1519) to 1.3M (1595)
 SE: fell from 1,700,000 to 240,000
 North: fell from 2,500,000 to 320,000
 Peru, 16th C.: between 8.5M and 13.5M people destroyed.
 Fredric Wertham, A Sign For Cain : An Exploration of Human Violence (1966):
South American death toll of 15,000,000.


I can't confidently estimate the number of unnatural deaths (i.e. indictable killings, as a
result of violence and oppression, both direct [war, murder, execution] and indirect
[famine, avoidable disease]) among Amerindians across the centuries, but as a guess, I'd
say 20 million, for no reasons other than it's half of the original 40M, and it seems to be
near the median of the 4 previous estimates. (Rummel, Barrett, Althea, Stannard) Not the
most solid grounds.





108

Specific Events:

 Hispanola (1492-1550)
o General native population decline
 Trager, People's Chronology: from 200-300,000 (1492) to 60,000
(1508) to 14,000 (1514) to <500 (1548)
 Wertham: plummet from 1,000,000 to 14,000.
 Stannard: from 8M (1492) to 4M or 5M (1496) to less than
100,000 (1508) to less than 20,000 (1518) to extinction (1535)
 Jan Rogozinski, A Brief History of the Caribbean (1994): Assessments of the number
of Indians throughout the Caribbean in 1492 range from 225,000 to 6M, half in
Hispaniola. All gone within a few decades.
 Dedication of a temple of Huitzilopochtli in Tenochtitlan by Aztec king
Ahuitzotl (1487)
o PGtH: 80,000 human sacrifices
o Mark Cocker, Rivers of Blood, Rivers of Gold (1998): 20,000
o Harris, Cannibals and Kings (1977): 14,100 est. by Sherburne Cook
 Human sacrifices among Aztecs
o Skull rack in Xocotlan: >100,000 skulls (Marvin Harris, Cannibals and
Kings, citing Spanish eyewitness Bernal Diaz)
o Skull rack in Tenochtitlan held 136,000 skulls according to Spanish
eyewitness Andres de Tapia
 Harris, Cannibals and Kings, considers that this "could be dismissed
as exaggerations were it not for ... methodically racked and hence
easily counted rows"
 Cocker, Rivers of Blood..., considers this an exageration: "double the
true figure"
 Spanish Conquest of Tenochtitlan (1520): 100,000-200,000 Aztecs killed in battle.
(PGtH)
 The Jivaro of EC & PE killed 25,000 Spaniards in 1599 (Cecil Adams
[http://www.straightdope.com/classics/a980731.html])
 see also 19th C. USA and


http://users.erols.com/mwhit

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