In 1944, a group of American statesmen committed the biggest usurpation of power in the history of mankind. The Bretton Woods Conference carved out a monetary future in which the United States would enjoy the exorbitant privilege of being able to print gold certificates while the rest of the world would have to work for their money.
On whose behalf? That is where things get tricky. If we are to naïvely view a nation as a single, unified body, then the privilege of money printing extends to the benefit of all American citizens. In practice, however, this has never been the case. Some individuals—American or otherwise—have not been able to partake in the benefits of US money-printing to the extent that this has been enjoyed by others.
The Highest Level of Privilege
The ability to create money out of thin air is not a privilege exclusive to states. It is a function of trust—and trust can be manufactured.
Anyone can write an IOU. Anyone can mint a currency. Anyone can issue stock certificates. This is becoming easier by the day and the general understanding of the benefits of being able to issue your own money and the tools available to do so are slowly becoming self-evident.
On an immediate timeframe, being credited an amount of money is no different than having that money in the first place. If a credit is good for buying a car, then it's good enough for most people. The problems with credit emerge when it comes with strings attached—restrictions on how it may be used or repaid.
The credit that the United States raises through its money printing comes with no similar stipulation. The existing system works on the assumption that the United States may be trusted with the power of the printer and that it will institute internal mechanisms to preserve the global order.
Qui Bono?
On a macro level, it is convenient to treat "The United States" as the money printer. However, that obscures the fact that the individuals who control the printer are real people with real desires, incentives and—most importantly—constraints. Qui bono, then?
One way to think about this question is to look at geography. Where does the money get printed? New York, perhaps? It is after all no coincidence that New York City is the financial capital of the world.
Benefits of the Money Printer
If I could take out unlimited credit, one should expect that I would "get rich" quickly—money would be no impediment to satisfy any economic desire. But the effects would not stop with me. Consider that those I choose to pay for goods and services would also get rich, and those who serve them would profit in turn. The further one is from the source—that is, me—the slower one's path to riches.
When money is no object, demand is entirely inelastic. Supply and the limits of desire are the only determining factors in price. If my bald head is willing to pay any price for a haircut, an entire industry might form around not only improving the quality of haircuts for the bald, but to also convince bald men that they need haircuts in the first place.
This is how demand flows outward from the money printer: unrelatable and hyper-optimized for the benefit of the center. As a result of the money printer, New Yorkers (resp. Americans) value their time more than the rest of Americans (resp. the World). When money is limitless, physics is your only constraint.
I pick on "New Yorkers" here to make an important point: not all Americans are equal. The coastal elites who sit near the money spigot do not equally share their privilege with the rest of the country. In fact, they often share it sooner with foreign counterparts—fellow elites—than with their own compatriots.
Tariffs and the End
Trump has recently imposed punitive tariffs on the rest of the world. Unlike his first term, where he pursued an accommodative policy that sought favor with Wall Street, he has now instituted shock therapy—in his words, "medicine"—and put the world on notice.
The United States is no longer interested in exporting dollars to the global economy. It wants those dollars back home.
Where will they go? At best—if inflation is to be avoided—they will return to the magic money machine that digitally "prints" the dollars, only to be deleted the same way they were created. Whether or not the President understands, the United States has stepped on the accelerator of de-dollarization; the magic money genie is going back in the bottle.
The Role of US Internal Politics
Surprisingly, the end of Bretton Woods is not due to some foreign plot. The system is unraveling because the American elite has failed to convince the lower class that extending the terms of their exorbitant privilege is of benefit to both sides. As a result, we are about to enter a world where the United States loses its ability to steer the global economy; with it, the exceptional way of life that the US citizenry has been able to enjoy since the end of the Second World War.
The realization of the end comes as a surprise. During his second-term campaign, Trump himself demonstrated an understanding of the importance of the US dollar, and promised to keep the system of power in place. The markets originally took this to mean that he would play by the rules, yet that has not been the case. His strategy appears to have shifted from working within the system to reshaping it entirely.
Who benefits from the shift? While it is not entirely true that people behave rationally, the median person does tend to act in ways consistent with their worldview. Problems might result from lack of foresight and inability to anticipate the desires and actions of others, especially rivals.
My sense is that the lower-class nativists in the United States feel comfortable enough to risk letting the entire system burn if it means leveling the playing field with the domestic elite. Two ingredients are required for revolution: class discontent and a lack of fear of the outside world. Both are present in America today. Trump's willingness to deliver may be the spark to a powder keg.
The market reaction to the poorly-executed implementation of tariffs means that there is no going back to the old way of doing things. Americans will work for their money just like everyone else.
While I do believe that this is a more-or-less intended consequence of revolution, some consequences may be unintended. Just because the US feels secure at this time does not mean that will continue to be the case. The Russian Revolution, for example, occurred during a period of high morale and widespread belief that the Imperial Army would soon march on Constantinople. Yet the internal upheaval resulted in territorial losses so severe that they undermined the security of the new Soviet state, leading to a delayed reckoning in 1941.
My guess it that the privileged status of the US will be lamented after it is lost and that the country as a whole will work hard to regain it. The current feeling of schadenfreude that some on the right feel towards the stock market drawdown is temporary. Reshuffling the deck won't change the rules of the game being played.
Conclusion
The Bretton Woods system is being dismantled from within. While this may come as a surprise to those who see the United States as a more-or-less perfect union, I posit that it signals an American revolution. Within a few years, the US dollar will likely lose its status as the world's reserve currency.
While that may hurt the average American in the short term, I believe that many Americans see this as a necessary cost—one worth bearing if it means reclaiming control over their lives at home.
Note
This article has been published on 𝕏; link available here.
