Summary: This series of posts provides excerpts from a recent speech by Qiao Liang, a Major General in the People’s Liberation Army. These give a glimpse into the thinking of China’s elites, unlike the US-centric perspective provided by our news media. Like any good speech, it grows more interesting as it unfolds. In part one the general describes the foundation of America’s Empire. A brief analysis follows the text.
Speech by Qiao Liang (乔良): part one
Major General in the People’s Liberation Army
Given at a study forum of the Chinese Communist Party, April 2015
Reported and translated by Chinascope
Reposted with their generous permission.
A. The First Financial Empire in History
… On August 15, 1971, when the U.S. dollar stopped being pegged to gold, the dollar ship threw away its anchor, which was gold.
Let’s take a step back. In July 1944, to help the U.S. to take over the currency hegemony from the British Empire, President Roosevelt pushed for three world systems: the political system – the United Nations; the trade system – the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO); and the currency financial system – the Bretton Woods system.
The Americans’ desire was to establish the U.S. dollar’s hegemony over the world via the Bretton Woods system. However, from 1944 to 1971, the dollar didn’t gain that power. What blocked the dollar? It was gold.
When the Bretton Woods system was set up, the U.S. promised the world that the U.S. dollar would be pegged to gold while every other country’s currency could peg to the dollar. One ounce of gold was fixed at US$35. With this promise, the U.S. couldn’t do anything according to its own will. In other words, the Americans couldn’t print an unlimited number of dollars. Whenever it printed a dollar bill, it had to add one additional ounce of gold into its treasury as a reserve.
The U.S. made that promise to the world because it held 80% of the world’s gold reserve at that time. The Americans thought that, with that much gold in hand, it was enough to support the U.S. dollar’s credibility.