A new “Bretton Woods Moment” is upon us, says the IMF.
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The way money works is undergoing big changes behind closed doors.
What is happening is something I want to shine the light on. The mainstream media misses a lot of it (Search Google News for ‘Bretton Woods Moment’ and see for yourself). How was this important change missed?
Politics has helped disguise the cracks in the financial system.
I spend a lot of my free time going down all the different finance rabbit holes and analyzing what experts on both sides of the fence are saying. (It’s also part of my 9-5 job working in finance to know what is happening.) Some financial experts spread fear. Some live in ignorance. Some say things will be better than ever. It pays to look at all sides to get a complete picture.
The world of finance must change, as you’re about to read. Preparation is a good long-term money strategy. What is happening is nothing to be fearful of either; just understand it.
Your money literacy helps you stress less and do more of the work you choose. It’s a small price to pay for learning about money. Here we go.
The IMF’s Bold Statement
This is what got everybody talking recently.
The IMF (International Money Fund) is a global organization that came out of the Bretton Woods Agreement in 1945. They help countries cooperate by acting as a monitor of the world’s currencies. The controversial thing they do is lend money to countries who are having issues paying their debts.
The speech was titled “A New Bretton Woods Moment” and was given by Kristalina Georgieva, Managing Director of the IMF. It had everybody in the finance world talking. It was completely unexpected.
The key central banks around the world have expanded their balance sheets by $7.5 Trillion in 2020. This has been largely through money printing — that is, creating money out of thin air.
What it means for you: Any money you have loses value when central banks create money out of thin air.
Asa result of all the money printing and debt that countries have had to take on, the way the economic structure works will have to change. Kristalina from the IMF introduced that idea in her Bretton Woods speech.
The Bretton Woods Agreement and System gave birth to a unified international currency exchange from the 1940s to the 1970s. In 1944 the US dollar was selected to be the global reserve currency. Still, today, most of the world’s trade occurs in US dollars.
Think of the US dollar as the most used currency, and the currency that most of the world’s debts are denominated in. It’s a currency that affects us all, even if you don’t live in the US.
Under the Bretton Woods Agreement each currency in the system had to be pegged to the US dollar. The dollar was then pegged to gold so it was backed by something real and valuable. In 1971 the US went off the gold standard — meaning, they could create money out of thin air backed by nothing. This effectively destroyed the Bretton Woods Agreement, but left in its path a global reserve currency, the US dollar, and the IMF and World Bank.
Fast forward to 2020. A global pandemic strikes. People can’t go about their life the same way. Everyday people need free money (stimulus) to survive. Governments create lots of money from nowhere. Debts skyrocket. Warren Buffett explained what is happening when he said “The [US] debt isn’t going to be repaid; it’s going to be refunded.”
This series of events is what caused Kristalina from the IMF to say:
Today we face a new Bretton Woods “moment.”
Translated: We need to renegotiate how the economic structure works. In other words, we need a new system of money. Creating money out of thin air, and bankrupting countries who can’t pay their debts, and having the IMF be the debt collector isn’t in the best interests of humanity. (Kristalina calls it the “solidarity on which a sisterhood and brotherhood of humanity is built.”)
This isn’t the first time
Kristalina wasn’t the first person to call for a new Bretton Woods Moment.
The former Governor of the Bank Of England (another central bank powerhouse), Mark Carney, suggested in 2019 a similar strategy:
While such concerted efforts can improve the functioning of the current system, ultimately a multi-polar global economy requires a new IMFS (international monetary and financial system) to realize its full potential.
The best solution would be a diversified multi-polar financial system, something that could be provided by technology.
As a consequence, it is an open question whether such a new… currency would be best provided by the public sector, perhaps through a network of central bank digital currencies.
Even a passing acquaintance with monetary history suggests that this center [current system] won’t hold.
If your mind isn’t blown yet around how this affects your way of life, then I don’t know what will do it for you.
What it means for you: the global financial system is changing. You need to understand the change so you don’t get stuck in the old financial system. Or lose money as a result of the transition from one system to another.
The Proposed Solution Is Happening Right Under Our Noses
Recently, the IMF held a meeting of central bankers. These people are some of the most powerful individuals in the world when it comes to how money works. In attendance was:
- Jerome Powell, Chair of the Federal Reserve in the US.
- Nor Shamsiah Mohd Yunus, Governor of the Central Bank of Malaysia.
- Agustín Carstens, General Manager of the Bank for International Settlements (aka The Central Bank of all Central Banks)
- Meeting Host: Kristalina Georgieva, Managing Director of the International Monetary Fund.
- Ahmed Alkholifey, Governor of the Central Bank of Saudi Arabia.
The meeting was titled “Cross-Border Payments — A New Beginning.” It was supposed to be all about sending money from one country to another. What occurred, quietly, was the discussion of currency. Cross-Border payments, translated, means a new financial system.
The conversation turned to “Central Bank Digital Currencies.”
Translated: a potential single-world digital currency that we don’t currently have, that you can access via your phone. China has already experimented with a central bank digital currency.
Ex-Goldman Sachs Banker and financial expert, Raoul Paul, summed up the IMF meeting about central bank digital currencies perfectly with this tweet.
The financial system is changing. This is a monumental moment in human history. The world of money is changing. How you earn money and what currency you’re paid in is up for debate. Where your money is invested and the value of your investments will be questioned too.
The winners will be the ones who take the time to understand what is happening and pivot their finances accordingly.
The ones who stand to lose some of what they’ve worked hard for are the ignorant people who are caught up in the noise of unimportant matters, while the financial system is rapidly changing due to excess money printing and an accumulation of debt globally that is unsustainable.
Money printed out of thin air will be worth less if a new financial system is born out of the current situation. Hard assets are your friend during this time.
You don’t have to be smart to financially come out of these changes better off. All you have to do is dare to listen, pay attention, and continue to learn how money works.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.