The Creature from Jekyll Island

Bretton Woods: An Attack on Gold

fhe game began at an international meeting of financiers, Politicians, and theoreticians held in July of 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire. Officially, it was called the United Nations Monetary and Financial Conference, but is generally referred to today as simply the Bretton Woods Conference. Two international agencies were created at that meeting: the International Monetary Fund and its sister organisation, the International Bank for Reconstruction and Development — commonly called the World Bank.

The announced purposes of these organizations were admirable. The World Bank was to make loans to war-torn and underdeveloped nations so they could build stronger economies. The International Monetary Fund (IMF) was to promote monetary cooperation between nations by maintaining fixed exchange rates between their currencies. But the method by which these goals were to be achieved was less admirable. It was to terminate the use of gold as the basis of international currency exchange and replace it with a politically manipulated paper standard. In other words, it was to allow governments to escape the discipline of gold so they could create money out of nothing without paying the penalty of having their currencies drop in value on world markets.

Prior to this conference, currencies were exchanged in terms of their gold value, and the arrangement was called the gold-exchange standard. This is not the same as a gold-standard in which a currency is backed by gold. It was merely that the exchange ratios of the various currencies — most of which were not backed by gold — were determined by how much gold they could buy in the open market. Their values, therefore, were set by supply and demand. Politicians and bankers hated the arrangement, because it was beyond their ability to manipulate. In the past, it had served as a remarkably efficient mechanism but it was a strict disciplinarian. As John Kenneth Galbraith observed:

The Bretton Woods arrangements sought to recapture the advantages of the gold standard — currencies that were exchangeable at stable and predictable rates into gold and thus at stable and predictable rates into each other. And this it sought to accomplish while minimizing the pain imposed by the gold standard on countries that were buying too much, selling too little and thus losing gold.

The method by which this was to be accomplished was exactly the method devised on Jekyll Island to allow American banks to create money out of nothing without paying the penalty of having their currencies devalued by other banks. It was the establishment of a world central bank which would create a common fiat money for all nations and then require them to inflate together at the same rate. There was to be a kind of international insurance fund which vvould rush that fiat money to any nation that temporarily needed it to face down a run on its currency. It wasn’t born with all these features fully developed, just as the Federal Reserve wasn’t fully developed when it was born. That, nevertheless, was the plan, and it was launched with all the structures in place.

The theoreticians who drafted this plan were the well-known Fabian Socialist from England, John Maynard Keynes, and the Assistant Secretary of the U.S. Treasury, Harry Dexter White.

The Fabian Society

The Fabians were an elite group of intellectuals who formed a semi-secret society for the purpose of bringing socialism to the world. Whereas Communists wanted to establish socialism quickly through violence and revolution, the Fabians preferred to do it slowly through propaganda and legislation. The word socialism was not to be used. Instead, they would speak of benefits for the people such as welfare, medical care, higher wages, and better working conditions. In this way, they planned to accomplish their objective without bloodshed and even without serious opposition. They scorned the Communists, not because they disliked their goals, but because they disagreed with their methods. To emphasize the importance of gradualism, they adopted the turtle as the symbol of their movement. The three most prominent leaders in the early days were Sidney and Beatrice Webb and George Bernard Shaw. A stained-glass window in the Beatrice Webb House in Surrey, England is especially enlightening. Across the top appears the last line from Omar Khayyam:

Dear love, couldst thou and I with fate conspire
To grasp this sorry scheme of things entire,
Would we not shatter it to bits, and then
Remould it nearer to the heart’s desire!

Beneath the line Remould it nearer to the heart’s desire, the mural depicts Shaw and Webb striking the earth with hammers. Across the bottom, the masses kneel in worship of a stack of books advocating the theories of socialism. Thumbing his nose at the docile masses is H.G. Wells who, after quitting the Fabians, denounced them as the new machiavellians. The most revealing component, however, is the Fabian crest which appears Between Shaw and Webb. It is a wolf in sheep’s clothing!

Communist Moles

Harry Dexter White was America’s chief technical expert and the dominant force at the conference. He eventually became the first Executive Director for the United States at the IMF. An interesting footnote to this story is that White was simultaneously a member of the Council on Foreign Relations (CFR) and a member of a Communist espionage ring in Washington while he served as Assistant Secretary of the Treasury. And even more interesting is that the White House was informed of that fact when President Truman appointed him to his post. The FBI had transmitted to the White House detailed proof of White’s activities on at least two separate occasions. Serving as the technical secretary at the Bretton Woods conference was Virginius Frank Coe, a member of the same espionage ring to which White belonged. Coe later became the first Secretary of the IMF.

Thus, completely hidden from public view, there was a complex drama taking place in which the intellectual guiding lights at the Bretton Woods conference were Fabian Socialists and Communists. Although they were in disagreement over method, they were in perfect harmony on goal: international socialism.

There were undoubtedly other reasons for Communists to be enthusiastic about the IMF and the World Bank, despite the fact that the Soviet Union elected at the time not to become a member. The goal of the organizations was to create a world currency, a world central bank, and a mechanism to control the economies of all nations. In order for these things to happen, the United States would of necessity have to surrender its dominant position. In fact, it would have to be reduced to just one part of the collective whole.

That fit in quite nicely with the Soviet plan. Furthermore, the World Bank was seen as a vehicle for moving capital from the United States and other industrialized nations to the underdeveloped nations, the very ones over which Marxists have always had the greatest control. They looked forward to the day when we would pay their bills. It has all come to pass.

IMF Structure and Funding

The International Monetary Fund appears to be a part of the United Nations, much as the Federal Reserve System appears to be a part of the United States government, but it is entirely independent. It is funded on a quota basis by its member nations, almost two hundred in number. The greatest share of capital, however, comes from the more highly industrialized nations such as Great Britain, Japan, France, and Germany, The United States contributes the most, at about twenty percent of the total. In reality, that twenty percent represents about twice as much as the number indicates, because most of the other nations contribute worthless currencies which no one wants. The world prefers dollars.

One of the routine operations at the IMF is to exchange worthless currencies for dollars so the weaker countries can pay their international bills. This is supposed to cover temporary cash-flow problems. It is a kind of international FDIC which rushes money to a country that has gone bankrupt so it can avoid devaluing its currency. The transactions are seldom paid back.

Although escape from the gold-exchange standard was the long-range goal of the IMF, the only way to convince nations to Participate at the outset was to use gold itself as a backing for its own money supply — at least as a temporary expedient. As Keynes explained it:

I felt that the leading central banks would never voluntarily relinquish the then existing forms of the gold standard; and I did not desire a catastrophe sufficiently violent to shake them off involuntarily. The only practical hope lay, therefore, in a gradual evolution in the forms of a managed world currency, taking the existing gold standard as a starting point.

It was illegal for American citizens to own gold at that time, but everyone else in the world could exchange their paper dollars for gold at a fixed price of $35 per ounce. That made it the de facto international currency because, unlike any other at the time, its value was guaranteed. So, at the outset, the IMF adopted the dollar as its own international monetary unit.

Paper Gold

But the Fabian turtle was crawling inexorably toward its destination. In 1970, the IMF created a new monetary unit called the SDR, or Special Drawing Right. The media optimistically described it as paper gold, but it was pure bookkeeping wizardry with no relationship to gold or anything else of tangible value. SDRs are based on credits which are provided by the member nations. These credits are not money. They are merely promises that the governments will get the money by taxing their own citizens should the need arise. The IMF considers these to be assets which then become the reserves from which loans are made to other governments. As we shall see in Chapter Ten, this is almost identical to the bookkeeping sleight-of-hand that is used to create money out of nothing at the Federal Reserve System.

Dennis Turner cuts through the garbage:

SDRs are turned into loans to Third-World nations by the creation of checking accounts in the commercial or central banks of the member nations in the name of the debtor governments. These bank accounts are created out of thin air. The IMF creates dollars, francs, pounds, or other hard currencies and gives them to a Third-World dictator, with inflation resulting in the country where the currency originated … Inflation is caused in the industrialized nations while wealth is transferred from the eeneral public to the debtor country. And the debtor doesn’t repay.

When the IMF was created, it was the vision of Fabian Socialist John Maynard Keynes that there be a world central bank issuing a reserve currency called the bancor to free all governments from the discipline of gold. With the creation of SDRs, the IMF had finally begun to fulfill that dream.

Gold Is Finally Abandoned

But there was still an obstacle. As long as the dollar was the nrimary currency used by the IMF and as long as it was redeemable in gold at $35 per ounce, the amount of international money that could be created would be limited. If the IMF were to function as a true world central bank with unlimited issue, the dollar had to be broken away from its gold backing as a first step toward replacing it completely with a bancor, an SDR or something else equally free from restraint.

On August 15,1971, President Nixon signed an executive order declaring that the United States would no longer redeem its paper dollars for gold. So ended the first phase of the IMF’s metamorphosis. It was not yet a true central bank, because it could not create its own world currency. It had to depend on the central banks of its member nations to provide cash and so-called credits; but since these banks, themselves, could create as much money as they wished, from now on, there would be no limit.

The original purpose had been to maintain fixed rates of exchange between currencies; but the IMF has presided over more than two hundred currency devaluations. In private industry, a failure of that magnitude might be cause for going out of business, but not in the world of politics. The greater the failure, the greater the pressure to expand the program. So, when the dollar broke loose from gold and there was no longer a ready standard for measuring currency values, the IMF merely changed its goal and continued to expand its operation. The new goal was to overcome trade deficits.

Trade Deficits

The topic of trade deficits is a favorite among politicians, economists, and talk-show hosts. Everyone agrees they are bad, but there is much disagreement over what causes them. Let’s have a try at it.

A trade deficit is a condition that exists when a country imports a greater value of goods than it exports. In other words, it spends more than it earns in international trade. This is similar to thesituation of an individual who spends more than he earns. In both cases, the process cannot be sustained unless: (1) earnings are increased; (2) money is taken out of savings; (3) assets are sold; (4) money is counterfeited; or (5) money is borrowed. Unless one of these occurs, the individual or the country has no choice but to decrease spending.

Increasing one’s earnings is the best solution. In fact, it is the only solution for the long haul. All else is temporary at best. An individual can increase his income by working harder or smarter or longer. A country does it the same way. But it cannot happen unless private industry is allowed to flourish in a system of free-enterprise. The problem with this option is that few politicians respect the dynamic power of the free-enterprise system. Their world is built upon political programs in which the laws of the free market are manipulated to achieve politically popular goals. They may desire the option of increasing the nation’s income by increasing its productivity, but their political agenda prevents that from happening.

The second option is to obtain extra money out of savings. But there are virtually no governments in the world today that have any savings. Their debts and liabilities exceed assets by a large margin. Likewise, most of their industries and their citizens are in a similar position. Their savings already have been consumed by government.

The third option, the selling of assets, also is not available for most countries. By assets, we mean tangible items other than merchandise which is normally for sale. Although these, too, are assets in the broad meaning, in accounting methodology, they are classified as inventory. The only government asset that is readily marketable is gold, and few countries today have a stockpile from which to draw. Even in those cases, what little they have is already owed to another government or a bank. As for private assets, nations can, for a while, sell these to foreign buyers and offset their negative trade balances. That is what has been happening in the United States for many years as office buildings, stocks, factories, and entire companies have been sold to foreign investors. But the fact remains that the nation is still spending more than it earns, and that process cannot continue indefinitely. Foreign ownership and control over industry and commerce also create sociological and political problems. Underdeveloped countries do not have to worry about any of that, however, because they have few private assets to sell.

The Counterfeit Option

The counterfeit option is available only if a country happens to be in the unique position of having its currency accepted as the medium of international trade, as has been the case for the United States. In that event, it is possible to create money out of nothing, and other nations have no choice but to accept it. Thus, for years, the United States has been able to spend more money than it earned in trade by having the Federal Reserve create whatever it needed.

When the dollar was separated entirely from gold in 1971, it ceased being the official IMF world currency and finally had to compete with other currencies — primarily the mark and the yen — on the basis of its relative merit. From that point forward, its value increasingly became discounted. Nevertheless, it was still the preferred medium of exchange. Also, the U.S. was one of the safest places in the world to invest one’s money. But, to do so, one first had to convert his native currency into dollars. These facts gave the U.S. dollar greater value on international markets than it otherwise would have merited. So, in spite of the fact that the Federal Reserve was creating huge amounts of money during this time, the demand for it by foreigners was seemingly limitless. The result is that America has continued to finance its trade deficit with fiat money — counterfeit, if you will — a feat which no other nation in the world could hope to accomplish.

We have been told that our nation’s trade deficit is a terrible thing, and that it would be better to weaken the dollar to bring it to an end. Weakening the dollar is a euphemism for increasing inflation. In truth, America is not hurt by a trade deficit at all. In fact, we are the benefactors while our trading partners are the victims. We get the cars and TV sets while they get the funny money. We get the hardware. They get the paperware.

There is a dark side to the exchange, however. As long as the dollar remains in high esteem as a trade currency, America can continue to spend more than it earns. But when the day arrives — as it certainly must — when the dollar tumbles and foreigners no longer want it, the free ride will be over. When that happens, hundreds of billions of dollars that are now resting in foreign countries will quickly come back to our shores as people everywhere in the world attempt to convert them into yet more real estate, factories, and tangible products, and to do so as quickly as possible before they become even more worthless. As this flood of dollars bids up prices, we will finally experience the inflation that should have been caused in years past but which was postponed because foreigners were kind enough to take the dollars out of our economy in exchange for their products.

The chickens will come home to roost. But, when they do, it will not be because of the trade deficit. It will be because we were able to finance the trade deficit with fiat money created by the Federal Reserve. If it were not for that, the trade deficit could not have happened.

Back to the main topic, which is the five methods by which a trade deficit can be paid. Through the process of elimination, the fourth option of borrowing is where the action is today for most of the world, and that is where the IMF positioned itself in 1970. Its new mission was to provide loans so countries can continue to spend more than they earn, but to do so in the name of overcoming trade deficits.

IMF Loans: Doomed but Sweet

These loans do not go into private enterprises where they have a chance of being turned for a profit. They go into state-owned and state-operated industries which are constipated by bureaucracy and poisoned by corruption. Doomed to economic failure from the start, they consume the loans with no possibility of repayment Even the interest quickly becomes too much to handle. Which means the IMF must fall back to the reserves, back to the assets, back to the credits, and eventually back to the taxpayers to bail them out.

Whereas the International Monetary Fund is evolving into a world central bank which eventually will issue a world currency based on nothing, its sister organization, the World Bank, has become its lending agency. Acting as Savior of the World, it seeks to aid the underdeveloped nations, to feed the hungry, and to bring a better life to all mankind. In pursuit of these humanitarian goals, it provides loans to governments at favorable terms, usually at rates below market, for terms as long as fifty years, and often with no payments due until after ten years.

Funding for these loans comes from member states in the form of a small amount of cash, plus promises to deliver about ten-times more if the Bank gets into trouble. The promises, described as callable capital, constitute a kind of FDIC insurance program but with no pretense at maintaining a reserve fund. (In that sense it is more honest than the real FDIC which does maintain the pretense but, in reality, is based on nothing more than a similar promise.)

Based upon the small amount of seed money plus the far greater amount of credits and promises from governments of the industrialized countries, the World Bank is able to go into the commercial loan markets and borrow larger sums at extremely low interest rates. After all, the loans are backed by the most powerful governments in the world which have promised to force their taxpayers to make the payments if the Bank should get into trouble. It then takes these funds and relends them to the underdeveloped countries at slightly higher rates, making a profit on the arbitrage.

The unseen aspect of this operation is that the money it processes is money which, otherwise, would have been available for investment in the private sector or as loans to consumers. It siphons off much-needed development capital for private industry, prevents new jobs from being created, causes interest rates to rise, and retards the economy at large.

The Hidden Agenda: World Socialism

Although most of the policy statements of the World Bank deal with economic issues, a close monitoring of its activities reveal a preoccupation with social and political issues. This should not be surprising considering that the Bank was perceived by its founders as an instrument for social and political change. The change which it was designed to bring about was the building of world socialism, and that is exactly what it is accomplishing today.

This hidden agenda becomes crystal clear in the nature of what the Bank calls Sectoral Loans and Structural-Adjustment Loans. In the first category, only part of the money is to be used for the costs of specific projects while the rest goes to support policy changes in the economic sector. In the second group, all of the money is for policy changes and none of it is for projects. In recent years, almost half of the loans to underdeveloped countries have been in that category. What are the policy changes that are the object of these loans? They add up to one thing: the building of world socialism.

As the Fabians had planned it, the word socialism is not to be used. Instead, the loans are issued for government hydro-electric projects, government oil refineries, government lumber mills, government mining companies, and government steel plants. It is delivered from the hands of politicians and bureaucrats into the hands of other politicians and bureaucrats. When the money comes from government, goes to government, and is administered by government, the result will be the expansion of government.

Here is an example. One of the policy changes often required by the World Bank as a condition of granting a loan is that the recipient country must hold down its wages. The assumption is that the government has the power — and rightfully should have the power — to set wages! In other words, one of the conditions of its loan is that the state must be omnipotent.

Paul Roberts holds the William E. Simon Chair of Political Economy at the Center for Strategic and International Studies in Washington. Writing in Business Week, he says:

The entire development process has been guided by the belief that reliance on private enterprise and equity investment is incompatible with economic and social progress. In place of such proven avenues of success, development planning substituted loans and foreign aid so that governments of the LDCs [Less Developed Countries] could control economic activity in keeping with plans drawn up by experts.

Consequently, economic life in the LDCs was politicized from the start. By endowing governments with extensive control over their economies, the U.S. set up conditions exactly opposite to those required for economic growth.

Ken Ewert explains further that the conditions imposed by the fund are seldom free-market oriented. He says:

The Fund concentrates on macro-policies, such as fiscal and monetary policies or exchange rates, and pays little attention to fundamental issues like private property rights and freedom of enterprise. Implicit … is the belief that with proper macro-management any economic system is viable …

Even more important, it has allowed governments the world over to expropriate the wealth of their citizens more efficiently (through the hidden tax of inflation) while at the same time aggrandizing their own power. There is little doubt that the IMF is an influence for world-wide socialism.

An important feature of the Structural-Adjustment Loans is that the money need not be applied to any specific development project. It can be spent for anything the recipient wishes. That includes interest payments on overdue bank loans. Thus, the World Bank becomes yet one more conduit from the pockets of taxpayers to the assets of commercial banks which have made risky loans to Third-World countries.

Austerity Measures and Scapegoats

Not every measure advocated by the IMF and World Bank is socialistic. Some of them even appear to be in support of the private sector, such as the reduction of government subsidies and welfare. They may include tax increases to reduce budget deficits. These policy changes are often described in the press as austerity measures, and they are seen as hard-nosed business decisions to salvage the failing economies of underdeveloped countries. But, as the wolf (in sheep’s clothing) said to Little Red-Riding-Hood, All the better to fool you with, my dear. These austerity measures are mostly rhetoric. The borrowing nations usually ignore the conditions with impunity, and the World Bank keeps the money coming anyway. It’s all part of the game.

Nevertheless, the structural-adjustment conditions provide a scapegoat for local politicians who can now place the blame for their nation’s misery on big, bad capitalists from America and the IMF. People who have been taught that it is government’s role to provide for their welfare, their health care, their food and housing, their jobs and retirement — such people will not be happy when they hear that these rights are being threatened. So they demonstrate in the streets in protest, they riot in the commercial sections of town so they can steal goods from stores, and they throng to the banner of leftist politicians who promise to restore or increase their benefits. As described by Insight magazine:

National strikes, riots, political upheavals and social unrest in Argentina, Bolivia, Brazil, Ecuador, Egypt, Haiti, Liberia, Peru, Sudan and elsewhere have at various times been attributed to IMF austerity programs …

Some came to the fund with domestic trouble already brewing and seized on the fund as a convenient scapegoat.

Quite true. An honest reading of the record shows that the IMF, far from being a force for austerity in these countries, has been an engine of socialist waste and a fountain of abundance for the corrupt leaders who rule.

Financing Corruption and Despotism

Nowhere is this pattern more blatant than in Africa. Julius Nyerere, the dictator of Tanzania, is notorious for his villagiza-tion program in which the army has driven the peasants from their land, burned their huts, and loaded them like cattle into trucks for relocation into government villages. The purpose is to eliminate opposition by bringing everyone into compounds where they can be watched and controlled. Meanwhile the economy staggers, farms have gone to weed, and hunger is commonplace. Yet, Tanzania has received more aid per capita from the World Bank than any other nation.

In Uganda, government security forces have engaged in mass detentions, torture, and killing of prisoners. The same is true under the terrorist government in Zimbabwe. Yet, both regimes continue to be the recipients of millions of dollars in World Bank funding.

Zimbabwe (formerly Rhodesia) is a classic case. After its independence, the leftist government nationalized (confiscated) many of the farms previously owned by white settlers. The most desirable of these lands became occupied by the government’s senior ruling-party officials, and the rest were turned into state-run collectives. They were such miserable failures that the workers on these farmlands were, themselves, soon begging for food. Not daunted by these failures, the socialist politicians announced in 1991 that they were going to nationalize half of the remaining farms as well. And they barred the courts from inquiring into how much compensation would be paid to their owners.

The IMF was represented in Zimbabwe at the time by Michel Camdessus, the Governor of the central Bank of France, and a former finance minister in Francois Mitterrand’s Socialist government After being informed of Zimbabwe’s plan to confiscate additional land and to resettle people to work on those lands, Camdessus agreed to a loan valued at 42 billion rands with full knowledge that much of it would be used for the resettlement project.

Perhaps the worst violations of human rights have occurred in Ethiopia under the Marxist regime of Mengistu Haile Mariam. The famine of 1984-85, which threatened the lives of millions of people, was the result of government nationalization and disruption of agriculture. Massive resettlement programs have torn hundreds of thousands of people from their privately owned land in the north and deported them to concentration-camp villages in the south, complete with guard towers. A report by a French voluntary medical-assistance group, Doctors without Borders, reveals that the forced resettlement program may have killed as many people as the famine itself. Dr. Rony Brauman, director of the organization, describes their experience:

Armed militiamen burst into our compounds, seized our equipment and menaced our volunteers. Some of our employees were beaten, and our trucks, medicines and food stores confiscated. We left Ethiopia branded as enemies of the revolution. The regime spoke the truth. The atrocities committed in the name of Mengistu’s master plan did make us enemies of the revolution.

Financing Famine and Genocide

In the 1980s, the world was saddened by photographs of starving children in Ethiopia, but what the West did not realize was that this was a planned famine. It was modelled after Stalin’s starvation program in the Ukraine in the 1930s and Mao’s starvation of the peasants in the ‘40s. Its purpose was to starve the population into total submission to the government, for it is the government which decides who will eat and who will not. Yet, right up to the time Mengistu was overthrown, the World Bank continued to send him hundreds of millions of dollars, with much of it going specifically to the Ministry of Agriculture, the very agency in charge of the resettlement program.

In the late 1970s the same story unfolded in Communist Vietnam. There were resettlement programs, forced collectivization, concentration camps, atrocities, and tens of thousands of dissidents escaping to the sea only to drown in overcrowded, leaky boats. Throughout it all, the regime was generously funded by the World Bank.

Laos has jailed thousands of political prisoners; Syria has massacred 20,000 members of its opposition; Indonesia has uprooted several million people from their homelands in Java; the Sandinistas in Nicaragua murdered their opposition and terrorized the nation into submission; Poland, while a puppet state of the Soviet Union, brutally suppressed its trade-union movement; China massacred its dissident students and imprisoned its religious leaders; and the former Soviets slaughtered civilians in Afghanistan while conducting a relentless espionage war against the entire free world. Yet, these regimes have been the recipient of literally billions of dollars from the World Bank.

How can the Bank’s managers continue in conscience to fund such genocidal regimes? Part of the answer is that they are not permitted to have a conscience. David Dunn, head of the Bank’s Ethiopia Desk explained: Political distinctions are not something our charter allows us to take into account. The greater part of the answer, however, is that all socialist regimes have the potential for genocide, and the Bank is committed to socialism. The brutalities of these countries are all in a days work for serious socialists who view them as merely unfortunate necessities for the building of their Utopia. Lenin said you cannot make an omelet without cracking a few eggs. George Bernard Shaw, one of the early leaders of the Fabian Socialist movement, expressed it this way:

Under Socialism, you would not be allowed to be poor. You would be forcibly fed, clothed, lodged, taught, and employed whether you liked it or not. If it were discovered that you had not character and industry enough to be worth all this trouble, you might possibly be executed in a kindly manner; but whilst you were permitted to live, you would have to live well.

Reason to Abolish the Federal Reserve

The top echelon at the World Bank are brothers under the skin to the socialist dictators with whom they do daily business. Under the right circumstances, they could easily switch roles. What we have seen is merely a preview of what can be expected for the entire world if the envisioned New World Order becomes operational.

The IMF/World Bank is the protege of the Federal Reserve. It would not exist without the flow of American dollars and the benevolence of American leadership. The Fed has become an accomplice in the support of totalitarian regimes throughout the world. As stated at the beginning of this study, that is one of the reasons it should be abolished: It is an instrument of totalitarianism.

Getting Rich Fighting Poverty

While the top leaders and theoreticians at the IMF and World Bank dream of world socialism, the middle managers and political rulers have more immediate goals in mind. The bureaucracy enjoys a plush life administering the process, and the politicians on the receiving end obtain wealth and power. Ideology is not their concern. Socialism, capitalism, fascism, it makes no difference to them as long as the money flows.

Graham Hancock has been an astute observer of the international-aid industry and has attended their plush conferences. He knows many of the leading players personally. In his book, Lords of Poverty, he speaks of the IMF’s Structural-Adjustment loans:

Corrupt Ministers of Finance and dictatorial Presidents from Asia, Africa, and Latin America are tripping over their own expensive footwear in their unseemly haste to get adjusted. For such people, money has probably never been easier to obtain than it is today; with no complicated projects to administer and no messy accounts to keep, the venal, the cruel and the ugly are laughing literally all the way to the bank. For them structural adjustment is like a dream come true. No sacrifices are demanded of them personally. All they have to do — amazing but true — is screw the poor, and they’ve already had plenty of practice at that.

In India, the World Bank funded the construction of a dam that displaced two million people, flooded 360 square miles, and wiped out 81,000 acres of forest cover. In Brazil, it spent a billion dollars to develop a part of the Amazon basin and to fund a series of hydroelectric projects. It resulted in the deforestation of an area half the size of Great Britain and has caused great human suffering because of resettlement. In Kenya, the Bura irrigation scheme caused such desolation that a fifth of the native population abandoned the land. The cost was $50,000 per family served. In Indonesia, the transmigration program mentioned previously has devastated tropical forests — at the same time that the World Bank is funding reforestation projects. The cost of resettling one family is $7,000, which is about ten-times the Indonesian per-capita income.

Livestock projects in Botswana led to the destruction of grazing land and the death of thousands of migratory animals. This resulted in the inability of the natives to obtain food by hunting, forcing them into dependence on the government for survival. While Nigeria and Argentina are drowning in debt, billions from the World Bank have gone into building lavish new capital cities to house government agencies and the ruling elite. In Zaire, Mexico, and the Philippines, political leaders became billionaires while receiving World Bank loans on behalf of their nations. In the Central African Republic, IMF and World Bank loans were used to stage a coronation for its emperor.

The record of corruption and waste is endless. But the real eye-opener is in the failure of socialist ventures, those magnificent projects which were to bring prosperity to the underdeveloped countries. Here are just a few examples.

Converting Money Into Failure

Before receiving loans from the World Bank, Tanzania was not wealthy, but it fed its own people, and it had economic growth.

After receiving more than 3 billion dollars in loans, it nationalized the nation’s farms and industries and converted every business into a government agency. It built a truck assembly plant, a tire factory, electronic factories, highways, ports, railways, and dams. Tanzania’s industrial production and agricultural output fell by almost one-third. Food was the main export in 1966. Under socialism, food had to be imported — paid for by foreign aid and more loans from the World Bank. The country is hopelessly in debt with no way to repay.

Argentina once had one of the highest standards of living in Latin America. But then it became the recipient of massive loans from the World Bank as well as commercial banks in the United States. Since the money was given to politicians, it was used to build the only system politicians know how to build: socialism. By 1982, the Gross National Product was in a nose dive, manufacturing had fallen to less than half of capacity, thousands of privately owned companies had been forced into bankruptcy, unemployment was soaring, and so was welfare. By 1989, inflation was running at an average of 5,000% and, in the summer of that year, topped at 1,000,000%! Banks were offering interest rates of 600% per month in hopes of keeping deposits from being moved out of the country. People were rioting in the streets for food, and the government was blaming greedy shop owners for raising prices. The nation was hopelessly in debt with no way to repay.

Brazil is run by the military, and the state controls the economy. Government-owned companies consume 65% of all industrial investment, which means that the private sector is Limited to 35% and is shrinking. The government used loans from U.S. banks to create an oil company, Petroleo Brasileiro S. A., which became Latin America’s largest corporation. Despite huge oil deposits and record-high oil prices, the company operated at a loss and was not even able to produce enough gasoline for its own citizens. By 1990, Nation was running at 5,000%. Since 1960, its prices had risen to 164,000 times their original level. A new crime was invented called hedging against inflation, and people were arrested for charging the free-market price for their goods and for using dollars or gold as money. Led by Communist organizers, mobs roamed the streets shouting We’re hungry. Steal what you will! The nation was hopelessly in debt with no way to repay.

The experience in Mexico was a carbon copy of that in Brazil, except that the amount of money was larger. When the world’s fourth largest oil reserves were discovered, Mexican politicians reached for the brass ring. With billions borrowed from U.S. banks, they launched Petroleos Mexicanos (PEMEX) and soon became the world’s fifth largest oil producer. They also built chemical plants and railroads, and launched many other industrial projects. These were run as welfare agencies instead of businesses: too many people on the payroll, too many managers, excessive salaries, too many holidays, and unrealistic benefits. The ventures floundered and lost money. Private businesses failed by the thousands, and unemployment rose. The government increased the minimum wage causing more businesses to fail and more unemployment That led to more welfare and unemployment benefits. To pay for that, the government borrowed even more and began creating its own fiat money. Inflation destroyed what was left of the economy.

Price controls were next, along with rent and food subsidies, and doubling the minimum wage. By 1982, Mexicans were trading their pesos for dollars and sending their savings out of the country, as the peso became all but worthless in commerce. In 1981, the average wage for Mexican workers was 31% of the average wage for Americans. By 1989, it had fallen to 10%. Mexico, once one of the major food exporters in the world, was now required to import millions of dollars worth of food grains. This required still more money and more loans. All this occurred while oil prices were high and production was booming. A few years later, when oil prices fell, the failures and shortfalls became even more dramatic.

In 1995, Mexico’s bank loans were once again on the brink of default, and, once again, U.S. taxpayers were thrown into the breech by Congress to cover more than $30 billion at risk. Although this loan was eventually repaid, the money to do so was extracted from the Mexican people through another round of massive inflation, which plunged their standard of living even lower. The nation is now hopelessly mired in socialism. The Communist Party, promising reform and still more socialism, is attracting a large following and could become a potent political force.

Thus, the saga continues. After pouring billions of dollars into underdeveloped countries around the globe, no development has taken place. In fact, we have seen just the opposite. Most countries are worse off than before the Saviors of the World got to them.

Summary

The IMF and the World Bank, were created at a meeting of global financiers and politicians held at Bretton Woods, New Hampshire, in 1944. Their announced goals were to facilitate international trade and to stabilize the exchange rates of national currencies. The unannounced goals were quite different. They were the elimination of the gold-exchange standard as the basis of currency valuation and the establishment of world socialism.

The method by which gold was to be eliminated in international trade was to replace it with a world currency which the IMF, acting as a world central bank, would create out of nothing. The method by which world socialism was to be established was to use the World Bank to transfer money — disguised as loans — to the governments of the underdeveloped countries and to do so in such a way as to insure the demise of free enterprise. The money was to be delivered from the hands of politicians and bureaucrats into the hands of other politicians and bureaucrats. When the money comes from government, goes to government, and is administered by government, the result will be the expansion of government.

The theoreticians who dominated the conference at Bretton Woods were the well-known Fabian Socialist from England, John Maynard Keynes, and the Assistant Secretary of the U.S. Treasury, Harry Dexter White. White became the first Executive Director for the United States at the IMF.

The Fabians were an elite group of intellectuals who agreed with Communists as to the goal of socialism but disagreed over tactics. Whereas Communists advocated revolution by force and violence, Fabians advocated gradualism and the transformation of society through legislation.

It was learned in later years that Harry Dexter White was a member of a Communist espionage ring. Thus, hidden from view, there was a complex drama taking place in which the two intellectual founders of the Bretton-Woods accords were a Fabian Socialist and a Communist, working together to bring about their mutual goal: world socialism.

Capital for the IMF and the World Bank comes from the industrialized nations, with the United States putting up the most. Funds consist partly of hard currencies — such as the dollar, yen, mark and franc — but these are augmented by many times that amount in the form of credits. These are merely promises by the member governments to get the money from their taxpayers if the Bank gets into trouble with its loans.

While the IMF is gradually evolving into a central bank for the world, the World Bank is serving as its lending arm. As such, it has become the engine for transferring wealth from the industrialized nations to the underdeveloped countries. While this has lowered the economic level of the donating countries, it has not raised the level of the recipients. The money has simply disappeared down the drain of political corruption and waste.