ECONOMICS, FREE POM
POM EXCLUSIVE: The Bretton Woods Origin Of The Cold War Part 1 of 2
SEPTEMBER 30, 2015
Counter-Intelligence, Atomic Bombs, Operation Paperclip, and the Liquidation of the British Empire
By JC Collins
The day was dull and mild when I stepped out of my truck last January in downtown Edmonton. It had just snowed, the wet sloppy kind, and I splashed my way across the street and entered the Tim Hortons coffee shop on Jasper Ave.
The night before I had received a comment on the site which started with PLEASE DO NOT POST. At the time there was no way for interested readers to contact me direct without submitting a comment. The message was very concise and stated that there was information I could use regarding the Bretton Woods Agreement.
The series I wrote titled SDR’s and the New Bretton Woods had garnered a lot of attention across a wide spectrum of countries and demographics.
The amount of messages I received claiming to know secret information about what was going on in the financial world involved everything from the so-called Dragon Family, and other ridiculous make-believe groups such as the White Hats. My reluctance to entertain such fantasy eventually led these people and groups to scurry off and seek attention elsewhere.
Though most of these messages and claims I ignored, and discarded for the silliness that they were, this particular message stood out in its simplicity and straightforward approach. The writer of the message suggested I meet him at the named location, at the named time, but would understand if I didn’t show up.
Being I’m the person I am, and that it was close to where I lived and worked, I decided I would take the chance and meet this mystery person. After all, what would I have to lose if it turned out to be a fraud or some weirdo seeking attention?
My ability to sniff out crap is sharp, and at times, to the partial detriment of the site, I have often filtered and deleted comments which I felt treaded into this land of make-believe and honey.
This particular Tim Hortons was on the lower floor and as I entered the shop I could see the street outside at eye level. The wet pant legs of pedestrians rushed passed the high windows. I quickly scanned the room and noticed a plain looking senior resting in the corner with a worn scarf wrapped tightly around his upper torso and neck, while a double-double coffee was cupped in both hands.
The man looked to be of Indian descent.
We made eye contact and I crossed the room in his direction. Sitting across from him I leaned forward and remained quiet.
After a few awkward minutes he began to talk openly about the need for Canada to depend on foreign intelligence capabilities during the war, and the fundamental reason why CSIS, the Canadian Security Intelligence Service, in later years would come to understand the role Canada played as the essential economic and military partner of the United States.
Some of the topics discussed involved how the CJIC, Canadian Joint Intelligence Committee, coordinated intelligence with both Britain and the United States during the war, and how Canada could not continue the policy of pre-war intelligence dependence on Anglo institutions.
It was considered that a reliable foreign policy would require a reliable source of intelligence gathering. Considering the close economic and military relationship between Canada and the United States, a policy of reliance and common-purpose with the OSS (and later CIA) developed, and affected Canada’s foreign policy mandates in the closing years of the war.
Other topics which came up involved Soviet spies posing as Canada Post workers, and other such cold war era hysteria. Intriguing though such things are, it was what was discussed about the Bretton Woods Agreement which caught my attention more than anything.
The interesting part was that he told me this information is not that secret, and in fact was, for the most part, widely accessible to anyone who looked hard enough. It was suggested that the information simply wasn’t packaged and presented in the most accurate way. A much more thorough and realistic analysis would better represent the events of that time.
From this conversation, and much research in the months after, I have come to the following conclusions about what happened at Bretton Woods and at the end of the war.
But first let’s begin somewhere between then and now.
Years after the Bretton Woods Conference of July, 1944, Walter Gardner of the Federal Reserve found a yellowing piece of paper at Princeton. While salvaging through the personal papers belonging to Harry Dexter White from the time period of the American and British negotiations leading up to the conference, Gardner found the hand written note, which stated:
In Washington Lord Halifax
Once whispered to Lord Keynes:
“It’s true they have the money bags
But we have all the brains.”
The authorship of the note has never been confirmed, but it is widely accepted that Sir Dennis Robertson, the British economist who handled financial negotiations with the American’s during the war, and played an important role at Bretton Woods, wrote the note during the first Anglo-American discussions on how to structure the post war monetary system.
Some obvious questions immediately come to mind. Such as:
Why was an Anglo delegate, one of Britain’s top economists, writing a note to the lead negotiator on the American team, one Harry Dexter White?
Was this note given directly to White by Robertson?
Did White find the note and keep it?
How did White’s role as a Soviet spy factor into the content of the note?
What is the reference to “they have the money bags”?
The last question is an easy one to answer. At the time of the Bretton Woods negotiations, the United States controlled two thirds of the world’s gold. Whether this was through strategic accumulation, or some other covert means, such as mechanisms used by the Bank for International Settlements, the reality of America’s superior monetary position was clear.
The fourth question is somewhat more problematic and will take some explaining, as I am proposing that Harry Dexter White was behind a master counter-intelligence plan to maneuver the world’s most powerful countries, including Great Britain and the Soviet Union, into accepting, and ratifying a Bretton Woods framework which was structured around the US dollar as opposed to the bancor, the unit of account which was recommended by John Maynard Keynes.
During the 1930’s Sir Dennis Robertson found himself at odds with John Maynard Keynes and became very critical and unwilling to accept Keynesian theory and Keynesian policy. What caused this rift between two of Britain’s most influential economists is not clear.
This division in the Anglo team at Bretton Woods would lead to the failure of Keynes’ bancor asset and the rise of the American dollar as the global reserve unit of account. In this rift can also be found the seeds of the cold war and the refusal by the Soviet Union to ratify the final Bretton Woods agreement.
At Bretton Woods the British delegation was headed by John Maynard Keynes and his concept of the supra-sovereign unit of account which he called the bancor.
The American delegation was headed by Harry Dexter White and his concept of using the American dollar as the global unit of account.
The wording which was built into the agreement was very specific, as all 44 countries, including the Americans, British, and Soviets, all contributed to the framework of the agreement. One area which still required clarification was surrounding the term “gold-convertible currency”.
Benn Steil, senior fellow and director of international economics at the Council on Foreign Relations, wrote in his excellent book, The Battle of Bretton Woods, the following regarding this “inscrutable” term. It is best to quote directly from the book:
“At the 2:30 PM Commission meeting the matter of the inscrutable “gold-convertible currency” naturally came up. The Indian delegate wanted to know what exactly it was: “I think it is high time,” he interjected during a lengthy technical discussion in which White had invoked the term, “that the USA delegation give us a definition of gold and gold convertible exchange.”
At that point, Dennis Robertson, the British delegate on the Committee, apparently imagining that the issue was one of mere bookkeeping suggested that “payment of official gold subscription should be expressed as official holdings of gold and United States dollars.”
This change would, he remarked incautiously, require wording changes elsewhere in the agreement. Bernstein concurred with Robertson that “gold convertible exchange” was hard to define, and that getting a definition “which would be satisfactory to everyone here… would involve a long discussion.”
But as a “practical” matter, he explained, since national monetary authorities could freely purchase gold for dollars in the United States, and international holdings of currencies which might be used to purchase dollars were small, “it would be easier for this purpose to regard the United States dollar as what was intended when we speak of gold convertible exchange.”
“White must have had difficulty concealing his flush of excitement. With Keynes preoccupied managing the World Bank proceedings, Robertson had walked straight into White’s trap. He now made his second critical maneuver, peremptorily ending the Commission’s discussion of the matter.
“Unless there are any objections,” he said, “this question will be referred to the Special Committee.” No objections being raised, he quickly passed on to another issue.”
“The next morning, 9:30 AM on July 14, Morgenthau began a meeting of the full American team by reporting cheerily that White had “worked up until three o’clock this morning with the Drafting Committee on the Fund and he feels [the text] is in excellent shape.”
Morgenthau had no idea what exactly that meant, and likely no interest. But among the achievements of the committee, comprised entirely of White’s technicians, was strategically replacing “gold” with “gold and US dollars” throughout the 96-page Final Act.
White never submitted the changes for consideration in Commission One, yet they would become an important part of the IMF Articles of Agreement. Keynes would only discover them after his departure from Bretton Woods.”
Comments may be made at the end of Part 2 Thank You