resident of the General Assembly New York Moreover, there is no reason for the ICJ to abdicate its judicial task, particularly when the beneficial consequences of such opinion are compelling, and would prevent impoverishment and penury for humankind as a result of an imminent economic crisis of unprecedented magnitude. The Gold Standard The initial purpose of the IBRD was to finance the reconstruction of war-torn Europe. After this was accomplished, the IBRD became the primary financier of development projects. The purpose of the International Monetary Fund (IMF) was to allocate access to international currency reserves within the system of par values (set values for each members currency in terms of gold), convertibility of members currencies, and fixed but adjustable exchange rates. After World War II, the U.S. dollar became the main currency for international capital flows outside of Europe. By the early 1960s, the U.S. dollars fixed value against gold was considered to be overvalued. Increased domestic spending on Great Society programs and military spending on the Vietnam War gradually worsened the overvaluation of the dollar. In 1971 the United States informed the IMF that it would no longer buy and sell gold to settle international transactions. This resulted in the 1973 decision of the European Community countries and the United States to introduce a joint float of European currencies against the U.S. dollar. Nevertheless, the U.S. dollar maintained its role as international money. The role of the IMF became less well-defined but in principle turned into one of surveillance and support for currencies in maintaining a stable link with major currencies. The banking system is under enormous stress as witnessed by the risk of permanent gold backwardation: when all offers to sell gold for dollars are withdrawn regardless how high the bid price may go. On July 7, 2013, gold leasing ended when GOFO (the difference between the rate offered for future leases and the rate that applies to leases already in force) became negative. The gold basis (the difference between the nearby futures price and the spot price of gold) also became negative. This indicates a shortage of deliverable gold and gold hoarding. To recapitulate, just like in 1971, negative GOFO indicates the risk of permanent backwardation. Without restored confidence in international currencies, a chain-reaction leading to a barter economy commences, bringing serial bankruptcies, unprecedented unemployment, and shortages of food, fuel, and medicine. This would result in famine, pestilence, and a break-down of law and order. When the value of US Treasury paper erodes, no amount of bond buying by the US Federal Reserve will be able to stop the collapse of the fiat dollar. The monetary reserves of the world’s currencies will be extinguished, representing the largest destruction of fiduciary values in all history. Much depends on how the banking system will hold up while the new gold strategy is being implemented. Interference with IBRDs Board of Executive Directors In 1944 delegates from forty-four countries attended a conference in a ski resort in Bretton Woods, New Hampshire to establish a multilateral institutional framework for the international financial and monetary system. The delegates considered a draft agreement prepared in April 1942 by Harry D. White of the U.S. Treasury and a draft that was prepared in June 1944 by the United Kingdom, principally by Lord John Maynard Keynes, who chaired the U.K. delegation to the Bretton Woods Conference. Lord Keynes recognized the special role of international lawyers in founding the Bretton Woods institutions: “We, the Delegates of this Conference, Mr. President, have been trying to accomplish something very difficult to accomplish…It has been our task to find a common measure, a common standard, a common rule applicable to each and not irksome to any. We have been operating, moreover, in a field of great intellectual and technical difficulty. We have had to perform at one and the same time the tasks appropriate to the economist, to the financier, to the politician, to the journalist, to the propagandist, to the lawyer, to the statesman—even, I think, to the prophet and to the soothsayer….I am certain that no similar conference within memory has achieved such a bulk of lucid, solid construction. We owe this not least to the indomitable will and energy, always governed by good temper and humor of Harry White. But this has been as far removed as can be imagined from a one-man or two-man or three-man conference. It has been teamwork, teamwork such as I have seldom experienced. And for my own part, I should like to pay a particular tribute to our lawyers. I have been known to complain that, to judge from results in this lawyer-ridden land, the Mayflower, when she sailed from Plymouth, must have been entirely filled with lawyers. When I first visited Mr. Morgenthau in Washington some three years ago accompanied only by my secretary, the boys in your Treasury curiously inquired of him—where is your lawyer? When it was explained that I had none—“Who then does your thinking for you?” was the rejoinder. That is not my idea of a lawyer. I want him to tell me how to do what I think sensible, and, above all, to devise means by which it will be lawful for me to go on being sensible in unforeseen conditions some years hence. Too often lawyers busy themselves to make commonsense illegal. Too often lawyers are men who turn poetry into prose and prose into jargon. Not our lawyers here in Bretton Woods. On the contrary they have turned our jargon into prose and our prose into poetry. And only too often they have had to do our thinking for us.[Lord Keynes, Chairman, Delegation of the U.K., Address at the Closing Plenary Session, July 22, 1944) in Proceedings of the U.N. Monetary and Financial Conference, Doc. 542, Vol. II, Bretton Woods, N.H., July 1-22, 1944, at 1240-41. Lord Keynes went on to say, ”We owe a great debt of gratitude to Dean Acheson, Oscar Cox, Luxford, Brenner, Collado, Arnold, Chang, Broches and our own Beckett of the British Delegation.” ] Aaron Broches, who was then a young counsellor at the Dutch Embassy, went on to work in the legal department of the IBRD, ultimately as its longest-serving General Counsel from 1959-1978. Aaron Broches considered the most important function of the legal department to be that of ensuring that the Presidency and Board of Executive Directors observed their respective powers laid out in IBRDs Articles of Agreement. Mr. Broches ability to mediate between the presidency and board was severely challenged when Robert McNamara assumed the presidency of the IBRD. After his retirement, Mr. Broches counseled, When the President of the World Bank comes from the Pentagon, the role of the General Counsel becomes all the more critical in preserving the authority of the Board.[ Conversation between Aaron Broches and Karen Hudes, October 5, 1995. ] On October 3, 2007, Ms. Karen Hudes[ Karen Hudes was Senior Counsel in IBRDs Legal Department from 1986-2007. On May 25, 2011 Ms. Hudes testified before a hearing of the European Parliaments Committee on Budgetary Control on whistleblowing. The European Parliaments Legal Department recommended that the European Parliament inform the World Bank about the material to be used at the hearing and that all Members of the European Parliament attending the hearing receive a full version of Ms. Hudes written contribution, including this chronology of internal control lapses. https://s3.amazonaws/khudes/chronology17%5B1%5D.doc] informed Mr. Kenneth Peel in the US Treasury Department that Senator Lugars office suggested that I contact you about an escalating perception that the US does not respect rule of law in its oversight of the World Bank. Now the members of the World Banks Board are subjected to intimidation for trying to restore rule of law at the Bank.” Earlier that day, Ms. Hudes had informed Keith Luse and Nilmini Rubin in Senator Lugars office, Jay Branegan on the staff of the Senate Committee on Foreign Relations, Jim Greene in then Senator Bidens office, Tom Crohan in Senator Kennedys office, and Jayme Roth in Senator Bayhs office: I have just returned from Holland, and learned there that Messrs. Wijffels and Melkert have informed the Dutch public that they were subjected to investigations of their private lives as a form of diplomatic blackmail. According to Mr. Wijffels, other executive directors on the World Banks Board have been similarly intimidated. This does not augur well for the upcoming Annual Meetings that will start October 20th. I attach translations and links to the stories in Dutch.
Posted on: Sat, 26 Oct 2013 17:29:01 +0000
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