for the post war two era at. the meeting we discussed our plans for the stabilization of the world. all agree must be ratified by the governing bodies of the nation from the bar before becoming a back. why was it so important to establish stabilization of the world's currency while for one the memories of world war one still lingered specifically the unintended consequences of the peace treaty that trait the treaty contributed to germany's bankruptcy hyperinflation and economic collapse which is why when designing the postal work through economic structure of the focus was on reconstruction rather than reparations the key goal of britain woods was to ensure a stable global currency regime that would help all sides rebuild their economic structure earlier we talked to ben steel the author of the new book the battle of britain woods i asked him if today's currency wars bear any resemblance to the currency wars of the one nine hundred thirty you know the organisation there might

have been last year seems to have broken down as you know there was a lot of buzz surrounding the i.m.f. spring meetings last week over whether japan might kick start a new international currency war but here's the fundamental problem over the past few months you've heard perfectly rational sober economic commentators arguing that the dollar is overvalued that the euro is overvalued that the yen is overvalued that the pound sterling is overvalued these four currencies alone represent over half the global economy they can't all be overvalued yet if policymakers in each country pursues higher net exports through currency depreciation some of them at least are going to be disappointed and that's when you run the risk of over protectionist measures no this is precisely what f.d.r. as treasury department was trying to stop permanently in the one nine hundred forty s. words but we have a graph here a central bank assets of the percent of g.d.p. europe and the u.s. share of central bank assets are steadily increasing over the. six years and

japan's are projected to reach sixty percent or higher makes a quantitative easing itself as a relatively recent phenomenon officially chasing back to japan and she thousand and one is it possible that balance sheet targeting are q.e. itself is a manifestation of new monetary regime and not unlike britain we're in uncharted territory is quantitative easing is a reaction to the fact that official policy rates have zero and all these key economic areas so if policymakers want to provide more stimulus they do use unusual means the interesting thing is that under the treasury department's philosophy back at bretton woods in the one nine hundred forty s. this would have been impossible because they were determined to institute a fixed exchange rate system where it would be really impossible for central banks to operate in such an uncoordinated manner all during brand loyal the u.s. heavily advocated for fixed exchange rates but now we see politicians calling for

floating exchange rates why they were criticizing switzerland for pegging to be hero or china after paying to the us dollar why have we seen such a drastic shift in attitude well actually the attitude has been very consistent what we saw in the one nine hundred forty s. that bretton woods was a more competitive dollar which is exactly what we're looking for today in the one nine hundred forty s. all the market pressure on the u.s. dollar was upward so by obliging other currencies currencies to fix to the u.s. dollar we were actually hoping to keep the u.s. dollar down over the past ten years of course we've seen downward market pressure on the u.s. dollar baeza be some key emerging market currencies particular in particular china's currency so when countries like china peg to the u.s. dollar they're actually keeping the u.s. dollar higher which is why we support floating exchange rates now as opposed to.

the fixed exchange rates we supported in the one nine hundred forty s. what do you think of the outcome of all this quantitative easing well i think we see the risk of a sort of uncoordinated on the ground wing of the international monetary system you you had after the financial crisis world leaders like britain's gordon brown and france's president sarkozy calling for a new bretton woods but we're seeing less and less coordination over time and that could kick start a currency war as countries try to increase net exports through depreciation put again if they're unable to do that then they may pursue more overt protectionist trade barriers i'd like to talk a little bit more about the history of britain why it's and from the description and your book that there seem to be quite the political and they're taking even in the choice of location and why why is it that this global economic conference took place inside a small unknown town in new hampshire. president roosevelt was determined not to

make the mistakes that president wilson made after world war one in particular not securing republican support for the league of nations so new hampshire had a republican senator charles tobey who was going to be in a difficult primary battle and president roosevelt thought well if i can help this isolationists charles tobie when his primary campaign he might become a convert to the cause as it were support a new international monetary agreement and convert some of his republican colleagues and you know that's exactly what happened. but this happened in one nine hundred forty four and by a war today and then telling one thousand and forty five so why did this gathering take place for a post war two economy before the war even ended well president roosevelt in particular was not interested in international monetary fares was very. interested

in sending a political message to the enemy axis powers that it was the united states and the allies who had the compelling postwar vision he actually believed that this would help bring the war to a successful earlier conclusion there were also some major political figures that participated in the conference one of them was john maynard keynes who represented the british interest and then harry why it representing the interests of the americans both seemed like i'm likely diplomats how did their personalities play out in the conference they couldn't of contrast to more hairy hairy dexter why it was the son of lithuanian jewish immigrants his father where the hardware peddler john maynard keynes was born of upper middle class cambridge academics and when they came together it was quite explosive and they have actually had to go she for two years in the run up to britain awards and they fought fiercely about whose plans would win the cain's plan for the white planet one point in one thousand nine hundred eighty three keynes gets fed up with wife who is jewish and yells at him

this is intolerable throws this plan on the on the floor and yells this is yet another told to which harry dexter white responds we will try to produce something which your highness understand. well i've got this uprising that the us solved britain as such a threat during the great and white conference and had suffered major blowback staring the war and just a few months earlier of a near bankruptcy the us supplied them with billions of dollars and. lend lease act why why have brought in such a threat to that remarkable harry dexter white from the time that he arrived at the us treasury in one nine hundred thirty four is convinced that britain is the natural geo political rival of the united states actually from the memo in his are from one thousand thirty six years before bretton woods in which he writes the more sterling countries there are in the world the more powerful position england will be around the conference table when a conference of benchley takes. so he was determined to pass the british up woods

and bretton woods was really part of a larger geo political agenda that f.d.r.'s treasury had which was to eliminate britain as an economic and political rival in the post-war world and if that happened yes in fact the british agreed to a sort of faustine bargain with the united states the united states provided limited financial assistance to britain in the form of lend lease aid in a post-war transitional loan in return for which the british agreed to three things to eliminate imperial trade preference this is the arrangement by which britain gave itself privileged access to the markets of its colonies and dominions it agreed to make the pound sterling fully convertible into u.s. dollars again at a fixed exchange rate which was a mortal threat to british solvency because they had so few dollars and so little gold and finally they would have to accept the u.s. dollar as the global unit of account after the war but as british delegate lionel robbins put it at bread it bretton woods we needed the cash while it sends us close

the gold window and one nine hundred seventy one we have seen geomagnetic progression and the dollar now of debt white capped the u.s. dollar as the reserve currency there really wasn't any alternative in fact harry dexter wyatt had said before congress in one thousand nine hundred five when he was trying to convince congress to ratify bretton woods that it was inconceivable that there could ever be a time in which the dollar would not be backed by gold keep the believe that if such a thing work to happen the dollar would no longer maintain its privileged place in the international monetary system book because there was no alternative the world as it were or gave the u.s. dollar a second chance and i think it was paul volcker who in the one nine hundred eighty s. sort of restored international confidence in the dollar and kept the international system from under rubble and. paul volcker a combo's accomplish this by raising short term. interest rates to over nineteen

percent in one nine hundred eighty one which eventually quell the turmoil and volatility in the bond markets and created a name for him as a price inflation fighter a legacy that still earned him praise today that was been steel author of the book the battle of bretton woods stay tuned as we faithfully break down money and no that doesn't involve italian motor cars there might be more than you would think than the producer bob inglis and i will discuss the fed's announcement today and that's exactly when ben might strap on his tightening tool belt we should be in a for quite the ride when interest rates and evidently rise also reveal who wants to put a good housekeeping seal of approval on every age fifty algo no really finally it will take a look at the just released facebook earnings statement. welcome

to. here you can feel it. there are three choices for the. first used to work you know michael let's go to. like a slate. the second is to jump to the. green . card and. just as they come on the number of an organization and get inside the growing trade . you did was something you'll never forget. ok let's.

look at the slightly you did it by paid for what i've done that would never stop a. leg

i.

you might have seen one of these cruising the streets as the five hundred the first models introduced in italy in one nine hundred fifty seven could go from zero to sixty mph in a whopping twelve seconds a few years ago the u.s. treasury thanks to tarp intervention guided chrysler into a merger with now the new and improved five hundred excel or a it's a long u.s. story much quicker six point seven seconds but there is another in the monetary world with more torque and acceleration potential than a humble car could ever generate so let's break down money or currency

investopedia says a government declares a currency to be legal tender despite the fact that it has no intrinsic value and is not backed by reserves historically most currencies were based on physical commodities such as gold or silver but. money is based solely on faith so why would anyone value this paper money well for one thing governments make them legal tender meaning all debts but most important taxes must be settled in them big coins the open source internet currency are another example particularly because they have no such official backing talk about. after world war two when the us dollar became the official world's reserve currency the bretton woods agreement fix the price of gold at thirty five dollars an ounce and other countries would head to the dollar and specific ratios this was not technically a monetary system since governments but not ordinary citizens could regime dollars for gold but at heart as the cost of the vietnam war escalated there was

a run on us gold and other countries realize that president nixon was spending far too many dollars in what could be redeemed in gold so what the nixon do well and nine hundred seventy one he permanently severed of a link between the dollar and gold when he closed the gold window. i have directed the secretary of the treasury to take the action necessary to defend the dollar against the speculators i have directed secretary connally to suspend temporarily the convert ability of the dollar. or other was. and late one nine hundred seventy two and i.m.f. committee on finance ministers and central bankers met to discuss monetary reform and according to an a.p. report the committee of twenty eight will be working to build a more flexible system and then the dollars one special status as the chief reserve currency but this didn't happen because the most important commodity in the world which is crude oil would be rising all only in u.s.

dollars whether this was by design or accidental this would allow the u.s. . price inflation to be contained and in essence it exported inflation to its trade partners so what has been the net effect of dylan king the dollar from gold well since one nine hundred seventy one the us dollar has lost more than eighty percent of its value and the supply of money has inflated upwards of nine hundred percent we'll have to wait to find out but one wonders if the slope on this chart can accelerate forever and that's how we break down the money. it is time now for our daily joining me is. time interest producer great to be

here again with you perry and thanks so much for joining me so exciting things happening today the kind of yeah well the federal open market committee released their announcement today said the labor market has shown improvement some improvement there preparing to encrease or reduce purchase a hits so what does that mean they're going both ways you know they like to do that they don't like to scare the markets too much so what they've done here ben bernanke and some of the other governors and epilepsy voting members have hinted that they're going to finally raise interest rates we're going to year five of near zero interest rate policy but they might do it by the end of the year so this little stunt and series but inserted into their announcement which comes out about every six weeks and so we might see interest rates rising later in the year and that has tremendous consequences for the markets and that's one of the things that we're going to be covering here of course while i have great news for you ok i know how much you love the fed ok you can now live at the fed and where is this antenna

thing the downtown fed building a private retail or a private real estate company has an old fed building and they're renovating it and it's going to be called the last of the reserve and it costs about twelve to eighteen hundred dollars to stay there and are they keeping any of the old remnants from the old federal reserve there are there yeah there remodelling it in a way to preserve a lot of us or call purposes and parts of the building i wonder if it's going to be haunted by the ghosts of the currency some day i guess we'll have to say i'm wondering if you can. call the fed in washington have them just print you the money to pay for the rent well that would be one way of going about it you'd be securitized somehow and sold off rated by moody's and sold off to investors in china or somewhere. well also chicago high frequency changers on the chicago mercantile exchange are gaining information before the markets by renting server space directly from the exchange in the data center so they're going

a lot of heat for this where you. i think it's important for people to realize that high frequency trading of what is this exactly. a lot of these programs reside on the actual floor of the data centers that we have the new york stock exchange we know that he has a big presence in stocks but it's also in the futures industry and chicago this is this has to do with the chicago mercantile exchange we have these goes which apparently have been front running trades for years coincidentally or not coincidentally enough actually yesterday gary gensler who's the head of the c.f. to see was pushing for a resolution or something you have to see that would monitor. and try to rein them in and this is after last week's and you will get a stamp on each one that's all this is this and he said this a couple of years ago he said he wants to put a good housekeeping stamp of approval on every i'll go i just literally impossible leave it up to him to figure out why no there we have the capacity to do. certainly

doesn't at least goes crying to the senate budget committee again for funding this year well i think you know what's really important to understand is that these companies who are engaging in this are trading and milliseconds and macro seconds so we're talking about thousands of a second billions of a second and ever firm is in this in this market space and they have the ability to take advantage of the lane and see issue at the c. and me all they have to do with their servers to be a part of it it's an arms race and you have to figure that the people who. making the most money are the firms and all the big banks like goldman sachs have their have their tentacles into this and goldman sachs is one of the largest traders historically they have been and what what's on the opposite side are the exchanges they have to make sure they're required by law to make sure that there's a fair market for the people like you and me who might want to buy futures contracts or stocks but they're only getting a limited investment revenue stream from the space that they're lending out so it

doesn't seem like it's that balance because the money isn't a they're lending the space millions while they're gaining billions on the order of probably an order of magnitude difference to me i want to say is that they're you know they're lending the space and which may or may not give them information beforehand we're showing the evidence of it but we heard from someone at the c.m.e. saying that this isn't all the time and it's not to malign all of two strategies that they're not all they're not all causing much market disruptions but one of the arguments against them that they tout is they say they provide liquidity and when we saw it i think we have a graph of this if we can go to a graph of last week's twitter a.p. fiasco the dow jones this is actually a seventy five hundred crashed about one percent within a couple of minutes and then it recovered over the next few minutes and this is something that was affected the futures markets and also the stock market and it was all based on somebody who hacked a twitter account which is kind of ludicrous for the whole reason why the rate

they're releasing server space is so they can have direct access to the c.m.e. so now we're harking on them for using that information that they're paying for well that's true but the exchanges are the regulators doing doing their job by allowing this to happen in the way that it's happening and that's the argument well i think what's more important is the infrastructure of these exchanges who's sitting on the board at these exchanges all the c.m.e. has one of the largest boards in existence you should see it's not only that this is an issue that goes way before. high frequency trading was ever in existence and so the infrastructure of the of these companies to begin with can be questionable if you look at the new york stock exchange it's a it's a public company now but it was operated a lot differently what it was just it was just a member exchange ever since it came became public that's when it started having to please the shareholders that's when it started having to generate revenue and that's when it started renting out leasing it's server space next to each of the

firms right next to its status and years all right let's move on to facebook just released their clearly earnings day and they parts were good parts are about to happen. ok it looks like there is a bit in a miss one hundred one point four six billion in revenue from thirty eight percent from q one two thousand and twelve ok so this was a beat and analysts were looking at earnings per share of thirteen cents they only got twelve cents you know big i think you know the problem with facebook is when you have an i.p.o. the stock is supposed to go up and there are so many problems at the stock is down right now and that's why investors are suing facebook they're saying that more exotic bird and company didn't provide adequate disclosures but it's all because they're losing money not being back goes back to when they issued their i.p.o. there were a lot of traders who had no information for days because well the system wasn't. there a lot of trading problems the day of the the day of the i.p.o. so there was that and i think the underwriters being sued separately for the you

know we're going to see what happens with facebook thanks. to that oh. it was a ho hum day at the fed but that. didn't stop us from deconstructing the fed nine speak the chairman does like to have in bonds and hold them to you can't. we also discuss the flame boy and keynes and it's us rival harry white as they duke it out in the woods of bread and for the future of currency we broke down feel money enclosed by only looking at the frequency which which change can be made when you're sitting next to the exchange data server and it's pretty which mark

zuckerberg might be after a b. and a mess on his face but earning and speaking of which be sure to follow us on facebook at facebook dot com slash prime interest thanks for watching and make sure to come back tomorrow and for all of us here at prime enjoy as have a great night. i am from. the lord that.

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