Bretton woods
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Bretton Woods

Summary
Ed Conway argues that Bretton Woods produced a unique set of rules and infrastructure for supporting the global economy.  It was enabled by the experience of Keynes and White during and after the First World War, their dislike of the Gold Standard, the necessity of improving the situation between the wars and the opportunity created by the catastrophe of the Second World War

He describes how it was planned and developed.  How it emerged from the summit.  And he shows how the opportunity inevitably allowed the US to replace the UK at the center of the global economy

Like all plans there are mistakes and Conway takes us through them and how the US recovered the situation as best it could. 

And then Conway describes the period after Bretton Woods collapsed.  He explains what followed and also compares the relative performance of the various periods before during and after Bretton Woods. 

Following our summary of his arguments RSS is Rob's Strategy Studio comments from the perspective of Complex Adaptive System (
This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
CAS
) theory.  Conway's book illustrates the rule making and infrastructure that together build an evolved amplifier.  He shows the strategies at play of agents that were for and against the development is a phase during the operation of a CAS agent.  It allows for schematic strategies to be iteratively blended with environmental signals to solve the logistical issues of migrating newly built and transformed sub-agents.  That is needed to achieve the adult configuration of the agent and optimize it for the proximate environment.  Smiley includes examples of the developmental phase agents required in an emergent CAS.  In situations where parents invest in the growth and memetic learning of their offspring the schematic grab bag can support optimizations to develop models, structures and actions to construct an adept adult.  In humans, adolescence leverages neural plasticity, elder sibling advice and adult coaching to help prepare the deploying neuronal network and body to successfully compete. 
and deployment of the system.  And The Summit provides a key piece of the history of our global economic CAS. 

The Summit Bretton Woods, 1944
In Ed Conway's book 'The Summit Bretton Woods, 1944' he argues that the decisions taken at the Bretton Woods Summit on financial infrastructure is of great significance:
The Mount Washington 
FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
wanted a deal by late July to discuss at the Democratic convention.   His Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
team selected New Hampshire for the economic summit to get away from Virginia's summer heat and to obtain New Hampshire Republican Charles Tobey's vote. 


The Bitter Peace
Conway introduces John Maynard Keynes, as a Bloomsbury Group member, old Etonian and star lecturer at Kings College Cambridge.  He worked at the UK Treasury during World War 1, becoming an advisor to the War Cabinet and part of High Society.  He was subsequently selected to negotiate the economic settlement with Germany at the Paris conference.   Keynes visited Ypres.  He was disappointed that the conference missed the opportunity to build a new foundation of economic cooperation.  Instead the British, French and Italian leaders aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
pushed Germany to the point of collapse.  President Wilson's 14 points approach was not a plan, scheme or other help in setting a path and making progress.  The American delegates learned they would need a plan next time.  Keynes left in disgust feeling:
Before the war the UK had been at the center of a global value delivery system.  The initiation of the war resulted in its collapse.  London was the financial system's hub but foreigners found they could not depend on the banking system to help pay their bills.  The situation affected stock brokers and banks.  A stock collapse impacted Keynes's family finances.  Conway explains that, while it was not yet understood, the Gold Standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
was unravelling into a true credit crunch.  London banks refused to exchange sterling for gold.  It was assumed the war would be over quickly.  Keynes and other economists pushed for the UK to return to the standard.  But as the war dragged on for four years the effects were devastating on the European population and its infrastructure. 

During 1917 President Wilson attempted to force the combatants to reconcile.  Through the Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
  • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
  • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
  • Federal Advisory Committee with twelve members
  • Single US currency - the Federal Reserve Note. 
he encouraged US banks to cut back credit lines to foreign borrowers inducing a sterling crisis.   Britain was close to bankruptcy is a legal status for an entity that cannot repay its creditor's loans.  It holds creditor lawsuits in abeyance while the restructuring process proceeds to allow the entity to continue operations.  It also has legal tools for forcing holdout creditors to accept repayments that are lower than the bond sale initially promised.   when German U-boat attacks pushed the US into the war and US credit flows to Britain restarted.  And a US Army was deployed to France. 

Once America entered the war Keynes work at the Treasury shifted from staving off bankruptcy to ensuring the flow of US is the United States of America.   loans.  But while he was the sharpest of intellects he was ill-suited to diplomacy.  During this period Keynes realized that policies have to be implemented which requires explaining them to others in terms they can understand.  His exceptional ability as a writer and journalist helped here. 

By the 1920s the US economy overtook the UK's with the dollar displacing sterling.  And America's GDP is:
  • Gross domestic product which measures the total of goods and services produced in a given year within the borders of a given country according to Piketty.  GDP has many problems:
    • GDP is a poor measure of:
      • Value & wealth
      • Who gets what
    • GDP excludes:
      • Services by house makers
      • Leisure
    • GDP includes items that should be excluded:
      • Cost of waste - cleaning up pollution, building prisons, commuting to work;
  • Guanine-di-phosphate is a nucleotide base. 
was already larger than the UKs. 


Harry Dexter White served as an army officer in France in World War 1 performing training but no active combat.  His parents were tsarists from Lithuania.  He adopted his best friend's name Dexter, to differentiate himself from the many other Harry Whites. 

During the 1920s the wealth gap in the US widened.  Many people were living in poverty.  The US financial system was building a bubble.  The political response was the progressive movement.  White had already volunteered to help the poor as a school boy and in 1919 he was drawn back into social justice work along with New Deal architect Harry Hopkins and Morgenthau. 

White supplemented his
Salman Khan argues that the evolved global education system is inefficient and organized around constraining and corralling students into accepting dubious ratings that lead to mundane roles.  He highlights a radical and already proven alternative which offers effective self-paced deep learning processes supported by technology and freed up attention of teams of teachers.  Building on his personal experience of helping overcome the unjustified failing grade of a relative Khan:
  • Iteratively learns how to teach: Starting with Nadia, Leveraging short videos focused on content, Converging on mastery, With the help of neuroscience, and filling in dependent gaps; resulting in a different approach to the mainstream method. 
  • Assesses the broken US education system: Set in its ways, Designed for the 1800s, Inducing holes that are hidden by tests, Tests which ignore creativity.  The resulting teaching process is so inefficient it needs to be supplemented with homework.  Instead teachers were encouraging their pupils to use his tools at home so they could mentor them while they attended school, an inversion that significantly improves the economics. 
  • Enters the real world: Builds a scalable service, Working with a real classroom, Trying stealth learning, At Khan Academy full time,  In the curriculum at Los Altos, Supporting life-long learning. 
  • Develops The One World Schoolhouse: Back to the future with a one room school, a robust teaching team, and creativity enabled; so with some catalysis even the poorest can become educated and earn credentials for current jobs. 
  • Wishes he could also correct: Summer holidays, Transcript based assessments, College education;
  • Concludes it is now possible to provide the infrastructure for creativity to emerge and to support risk taking. 

Following our summary of his arguments RSS frames them from the perspective of complex adaptive system (CAS) theory.  Disruption is a powerful force for change but if its force is used to support the current teachers to adopt new processes can it overcome the extended phenotypic alignment and evolutionary amplifiers sustaining the current educational network? 

education
studying government at Columbia and then economics at Stanford where he was recognized as exceptional. 

A short history of Gold
The international economic system was based on gold was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
.  But after World War 1 it could not cope.  The Great War had finished it off. 

While a variety of metals had been used as currencies is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
historically the UK's use of gold and centrality in world trade propelled the adoption of a gold standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
.  But where the trading partners' economies were weak the deflationary pressures on pay and prices built resentment of the standard.  And central bankers often: Adjusted local interest rates rather than moving gold from country to country, Allowed more money to circulate than they had agreed; as the rules required.  It was difficult to match a country's situation to its stock of gold. 

It was only serendipitous discoveries of more gold that allowed the metal to track the expansion of the world economy. 

When gold was abandoned businesses found themselves in a position of great uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers.  This is different from Risk.   from the new floating exchange rates.  However, brokers and speculators including Keynes made lots of money on currencies, shares and commodities.  Keynes was hit by the 1929 crash but recovered over the 1930s. 

Economic consequences
The Peace of Versailles had disastrous consequences. 

The UK had a terrible 1920s.  There was 11% unemployment. 
In the immediate aftermath of the Great War, with Britain still off the Gold Standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
, the Bank of England and the Treasury engineered some inflation to support the returning soldiers.  Keynes was teaching at Kings.  His expertise was leveraged by the chancellor Neville Chamberlin.  But soon the government reversed course raising interest rates to 7% to move the economy in line with the level of gold reserves so as to prepare for a return to gold.  The effect was to suck cash out of the economy and generate terrible austerity.  Keynes criticized the policy arguing "The problem with the Gold Standard is it forces central bankers to follow its rules instead of their economies."  Keynes asserted if all the countries followed the Gold Standard there would be inflation in the US and deflation in the poorer European economies. 
In 1925 then Chancellor Winston Churchill, with poor advice from the Bank of England and pressure from J.P.Morgan, put the UK back on Gold.  Churchill later admitted it was the greatest mistake of his life. 
Keynes wrote a tract on monetary reform in which he expressed some of the key aspects of Keynesianism:
  • Country should set economic policy for domestic reasons -- not the Gold Standard
  • Deflation must be avoided at all costs

The US had remained on the Gold Standard throughout the Great War.  Consequently gold flowed into the country raising prices as Keynes had foretold.  Ignoring the rules of the standard the New York Fed responded by constraining cash.  Keynes noted that the New York Fed was setting up a dollar standard masquerading as gold. 
Gold continued to flow into the US through the 1920s driving inflation and an economic bubble which burst in 1929. 


During the war France and Germany had both printed money to help with funding.  The result was both economies suffered from inflation.  The Peace agreement ensured the economies of Germany and France were undermined: 
White studied the French Economy for his PhD dissertation.  He concluded that 'hot money' was a problem and should be constrained in both direction and volume of flow.  This became a central focus of Breton Woods. 


By 1932 The US boom had transformed into the Great Depression, impacted by the 1929 crash and the 1931 failure of the huge Austrian bank Credit Anstalt which was too big to fail and too big to bail out.  The Gold Standard helped the effects flow around the world.  Germany's economy had been expanding in the late 1920s due to the inflow of American cash.  The 1929 crash pulled this capital out of Germany.  Rather than print money Bruning allowed the economy to deflate.  The austerity polarized the people and by 1932 the Nazi's were elected to power. 

The UK was attacked by speculators.  The treasury defended the pound with a further austerity drive that was so severe the British Navy went on strike.  Having expanded the vote to all males and so increased the influence of labor Britain, and other European nations, had to abandon the Gold Standard which the US considered a default on its war debt. 

In the US the Gold Standard then undermined bank rescues.  Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
Secretary Mellon made the situation worse recommending the US liquidate:
  • Labor
  • Stock
  • Stocks
  • Farms
  • Real estate
White disagreed and proposed some of Keynes's strategies should be used by the President:
  • Write off debts
  • Fund public works
  • Pump cash into the economy
Conway notes White was also interested in looking at how the Soviet economy was operating and expressed an interest in understanding Gosplan was the central economic planning agency of the USSR.  .  White took a temporary position at the Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
where he rose rapidly.  FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's Treasury Secretary, Morgenthau liked is an emotion which initiates and maintains an altruistic partnership.  It is a willingness to offer someone a favor.  It is directed to those who appear likely to return the favor.   White.  Others thought him a self-serving snob and very stubborn and became his enemies, leaving him totally dependent on Morgenthau's backing. 

FDR adopted Keynesian policies, but he found the man arrogant and patronizing.  He took the US off the gold standard in 1933.  He ridiculed the gold standard indicating the US would not go back onto it.  Instead FDR set the value of the dollar each morning over breakfast aiming to keep it low relative to the pound.  The result was a fiscal race to the bottom which catalyzed the raising of trade barriers via the: Smoot-Hawley act raised import duties on over 20,000 imported goods.  It was signed into law by President Herbert Hoover in 1930. 
in the US and Sterling zone in the UK. 

Keynes thought deeply about the failure of classical economic theory to explain long lasting depressions.  He replaced the accepted theory -- "Say's law" that the cost of labor was the key variable and that supply and demand otherwise operated an equilibrium -- with the proposal, in The General Theory of Employment, Interest and Money, that the key variable was how much money people were willing to spend at any particular time.  He suggested in a depression people were hording their money.  In the US Harry Hopkins and Marriner Eckles accepted Keynes ideas and lobbied FDR to abandon his balanced budget strategy but Morgenthau was unconvinced.   France, following one of their own, Say, stuck with classical theory and gold for as long as they could.   In 1936 they finally abandoned gold and came out of recession soon afterwards. 

In 1937 Keynes was found to have IE is infective (bacterial) endocarditis.  The infection of the endocardium -- heart inner lining -- or the heart valves causes inflammation and can be fatal. 
and spent two years bed ridden.  He struggled with it and the treatments for the rest of his life. 

After Hitler invaded Czechoslovakia, he had the BIS is the Bank for International Settlements based in Basel, Switzerland.  It was initially setup to manage Germany's war reparations payments. 
transfer Czechoslovak gold to Germany, with an ok from the Bank of England, to help pay for the war effort.  The US found out about the transfer.  In frustration they concluded that finance must be used to subvert totalitarianism. 


Lunatic Proposals
A Nazi international monetary system proposal, the financial 'new order', developed by economic minister Walter Funk was released in 1940.  Conway jokes it resembles the architecture of the EU is European Union. 
!  It included:
Harold Nicholson's UK Ministry of propaganda asked Keynes to lampoon the proposal but Keynes liked most of the ideas.  It:
  • Removed gold
  • Placed controls on capital flows
  • Managed balances on current accounts
It was the impetus for Keynes to formulate his own plan for post war development is a phase during the operation of a CAS agent.  It allows for schematic strategies to be iteratively blended with environmental signals to solve the logistical issues of migrating newly built and transformed sub-agents.  That is needed to achieve the adult configuration of the agent and optimize it for the proximate environment.  Smiley includes examples of the developmental phase agents required in an emergent CAS.  In situations where parents invest in the growth and memetic learning of their offspring the schematic grab bag can support optimizations to develop models, structures and actions to construct an adept adult.  In humans, adolescence leverages neural plasticity, elder sibling advice and adult coaching to help prepare the deploying neuronal network and body to successfully compete. 
of the international monetary system.  Ever since the shattering of the Gold Standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
it was clear such a plan was needed to replace the pre-war rules and regulations.  All recent frameworks had failed problematically.   Keynes leveraged the 'new order' ideas but fixed the currencies to gold.  His innovation is the economic realization of invention and combinatorial exaptation. 
was the proposal of a 'European reconstruction fund' to help rebuild the war ravaged economies.  This would offset the starvation required by any armistice. 

White had independently developed a similar proposal. 

Germany's 1940 defeat of France and the UK is the United Kingdom of Great Britain and Northern Ireland. 
resulted in Churchill becoming prime minister and shifting the war effort from financially limited to total deployment of resources, with the presumption that the US is the United States of America.   would foot the bill.  Given the political divisions in the US that would prove impossible in the short term. 

While the UK spiraled towards financial collapse FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
worked to:
But, to the UK leadership aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
's dismay FDR then spent 1941 backing away from Lend-lease. 

A German bomb killed Lord Josiah Stamp.  Having already worked with the US on the Dawes plan of 1924 was developed to resolve the crushing World War 1 reparations problem.  It was proposed by the US Dawes Committee with UK negotiator Lord Stamp.  It provided for an end to the Allied occupation of the Ruhr, and phased payments by Germany.  The plan proved unworkable and was replaced in 1929 by the Young Plan. 
and being liked is an emotion which initiates and maintains an altruistic partnership.  It is a willingness to offer someone a favor.  It is directed to those who appear likely to return the favor.   and respected there, he had been the UK's natural choice to be the financial envoy to the US.  Keynes replaced him at the Bank of England and as the envoy.  With the UK rapidly collapsing it was urgent to get Lend-lease operative. 

While his reputation and ideas were admired Keynes alienated all the US leaders during his Lend-lease visit.  Conway argues this was in part because Keynes was used to the UK's ministerial government, where a few private meetings can build agreement and action around his economic arguments.  He was unaware of the constraints and strategies required to operate the US government.  And then there was his personality differs in at least five key ways:
  • Extroversion-introversion - whether the person gains energy from socializing or retiring
  • Neuroticism-stability - does a person worry or are they calm and self-satisfied
  • Agreeableness-antagonism - is a person courteous & trusting or rude and suspicious
  • Conscientiousness-un-directedness - is a person careful or careless
  • Openness-non-openness - are they daring or conforming
!  This mixture alienated Secretary Morgenthau who had already taken political risks for the UK. 

Keynes discovered the Lend-lease agreement had a sting in its tail: The US was requiring a free trade agreement.  This would undermine Imperial Preference, the trade barrier placed around the empire which was stopping the dominions from realizing their UK sterling debts.  Keynes felt he must protect the post-war UK from speculators and a cash collapse and thus resist free trade.  But FDR required it and it became agreed as article VII of Lend-lease. 

FDR, Morgenthau and White then extended Lend-lease financial support to the Soviet Union.  The Japanese responded with the attack on Pearl Harbor.  The people of the US accepted they were at war with Japan and Germany. 

Bedlam 1941-44
After Pearl Harbor in Dec 1941 Morgenthau made White 'unofficially' an assistant secretary.  He asked White to consider the potential of an international currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
.  White developed a post-war currency plan designed to secure the US economic rise and push the UK further from the center.  He aimed to disband the Sterling zone, to replace London as the key financial hub. 

White's plan had two economic goals:
  1. Stabilize foreign exchange rates - via a stabilization fund which became White's main focus. 
  2. Setup an agency to rebuild the world economy after the war.  A bank to support reconstruction and redevelopment. 
White's plan had a clause allowing countries to levy tariffs on a country whose currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
became scarce.  It became part of the IMF articles but, Conway notes, has never been used. 

White proposed to Morgenthau a conference to agree on the implementation with all the allied governments. 
But the US Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
was struggling to limit the State departments competitive proposals to meet with the allies and formulate a politically driven 'peace conference'. 



The UK ministers responded to Lend-lease included a preliminary agreement and the act. 
  • Agreement included 8 articles:
    1. The US agreed to supply defense articles services and information as the President authorizes. 
    2. The UK will contribute to the defense of the US providing such articles it is in a position to supply.  
      • This resulted in the transfer of a cavity magnetron, the designs of the VT fuze and Whittle jet engine and the description of the feasibility of the A bomb.  As well as designs of rockets, superchargers, gyroscopic gunsights, submarine detection devices, self-sealing fuel tanks and plastic explosives. 
    3. UK can not transfer title of the goods and services without permission of the President. 
    4. Patent protected articles and information will be paid by the UK government when requested to do so by the President. 
    5. At the end of the emergency the UK government will return articles and information that has not been destroyed or used as requested by the President. 
    6. In assessing the articles to be returned the US will take into account articles already transferred to the US and accepted/acknowledged by the President. 
    7. The final benefits provided by the UK to the US in return for the aid will include:
      • No burden to commerce between the two countries
      • Promotion of mutually advantageous economic relations
      • Betterment of world-wide economic relations
      • Elimination of all forms of discriminatory treatment in international commerce
      • Reduction of tariffs and other trade barriers. 
      • Conversations to be held to determine in the light of governing economic conditions, the best means of attaining the objectives. 
    8. Agreement to take effect immediately.
  • Act to Promote the Defense of the United States, of March 1941 which superseded the neutrality acts. 
article VII.  So Keynes initiated work on a plan for a post-war international currency framework, but based on a debtor's perspective.  The centralization of academic talent in the treasury during the war encouraged the development of a variety of ground breaking plans:
  • Mead and Robbins White Paper on Employment
  • Beveridge's plan for a Welfare State
Keynes's plan looked to fix the Gold Standard was a set of informal agreements between central banks:
  • To support operation of the global trade between nation states
  • To convert their local currency to gold at an agreed conversion rate when asked.  It was
  • Based on David Hume's price specie flow theory.  But in practice it suffered from a mismatch between:
    • An economies changing situation
    • The rigid rules constraining central bankers and
    • The limited quantity of gold.  When America's economy expanded during the 1920s and gold flowed into the country, struggling European economies deflated to maintain currency parity with gold.  Economists such as Keynes argued it was more sensible to manage economies by responding to their situation within the global network. 
s:
  • Compulsory adjustments for debtor nations
  • Voluntary adjustments for creditor nations
Keynes developed two proposals:
  1. A decoy proposal which made adjustments compulsory for both creditor and debtor based on barter.  Every country had to develop bilateral agreements with all trading partners ensuring compensating trade flows.  The Bank of England liked this strategy since it protected the sterling zone. 
  2. The real proposal of a clearing union.  This included:
Feedback from the UK treasury team in the US was that Keynes real plan would not be attractive to the Americans.  Congress does not like is an emotion which initiates and maintains an altruistic partnership.  It is a willingness to offer someone a favor.  It is directed to those who appear likely to return the favor.   super national structures, creditor penalties or powerful central banks. 

Conway notes that both the White and Keynes plans contained common goals of:
It was imperative to the UK, as a major debtor coming out of the war, to ensure the existence of a framework that would pull the UK out of collapse.  They assumed that agreeing a plan in private with the US would be the best way to achieve this goal.  They hoped to leverage Keynes plan in joint discussions to achieve this goal. 


Keynes and White reviewed each other's plans in the summer of 1942 and realized there was quite a lot in common:
  • Fixed exchange rates
  • Central coordination mechanism/organization to discipline economies that were out of step with exchange rates.  
  • Constraints on hot money
Keynes was critical of White's using gold with an amplifier.  He advocated for the clearing union.  But he was relieved to see White move the UK's "blocked balances" over to the fund.  Surprisingly the UK leadership aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
rejected this offer and then subsequently struggled with repaying these debts to the dominions. 

The US wanted limited liability on extending US credit and was frustrated that Keynes plan provided few constraints on any country except the US. 
The meeting of White and Keynes identified the main differences:
  • Fund's size - which was too small according to Keynes.  The US agreed to double its size. 
  • Countries were required to invest upfront which would be difficult for the UK. 
  • Exchange rate changes were controlled by the US which the UK feared. 
When the two plans were leaked to the public the US position became "adopt White's plan or there will be no plan".  The UK had little choice since the dominions liked White's plan as well.  So the UK decided to push for:
  • More power to the members of the fund
  • Reducing the amount of gold that had to be given to the fund
  • An international currency.  White could not see any viable currency but gold backed dollars.  
  • A meeting between the UK and US in Washington in the autumn of 1943 to leverage the pragmatism of war time to gain agreement to an economically valid plan - with workable solutions to the initial goals

Snake Bite Party
FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
reelection planning resulted in two goals for White:
  1. Deal must be sealed by the Democratic convention
  2. Deal must not look like a fait-a-comp-lit to the participants or Congress. 
White concluded he must get the economic essentials agreed prior to the main meeting.  He would leave the question of IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
quotas for the main Bretton Woods Summit. 

White proposed to have a pre-summit to agree the economic essentials.  In effect that:
On the trip over to Atlantic City for the Bretton Woods pre-meeting Keynes and his team developed an alternative 'boat draft' of White's plan for the Fund.  And Keynes developed a proposal for the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
to ensure recovery funding for Europe.  The difficulty with building this proposal was that the team was all economists not bankers. 

Babel on Wheels June 1944
White's aim was to keep the US government leaders aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
away from the Atlantic City pre-meeting so that he could guarantee to achieve FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's goal 1 by agreeing a sound economic framework with the British.  As the pre-summit progressed this strategy backfired when Morgenthau becoming panicked that he did not know what he was going to be asked to sign.
At Atlantic City White kept his overall plan to his closest confidants such as Edward Bernstein, but his full team were allocated discrete aspects and trained how to manage them since White would be preoccupied in chairing the summit:
White had his lawyers alter the economic wording so that its goals and constraints were obtuse.  His aim was to ensure that there was wiggle room for the fund managers to cope with any circumstance.  Keynes called the language "Cherokee" but White ensured it stayed in the plan for the fund. 

The US rejected the UK's "boat draft" IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
changes.  The UK was hamstrung by the dominions acceptance of the US positions.  The US allowed some leeway with the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
where Keynes wanted to allow delayed payments for capital and which the US appeared to be using to trade its potential for redevelopment of debtor and undeveloped nations to gain votes for the US IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
proposals. 

The Summit: week one
White's goal for the Bretton Woods's summit was to agree a plan that all attendee's would sign-up to.  He ran his team through a
The page describes the SWOT process.  That includes:
  • The classification of each event into strength weakness opportunity and threat.  
  • The clustering process for grouping the classified events into goals.  
  • How the clusters can support planning and execution. 
Operational SWOT matrices and clusters from the Adaptive Web Framework (AWF) are included as examples. 
SWOT
of each of their opponents regarding the fund is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
's quotas:
  • China would demand to be fourth
  • France will require 5th place but so will India
  • Latin American countries were important to the US is the United States of America.   since they could backstop any contested US vote at Bretton Woods. 
White had organized the summit around three commissions.  The two main commissions were meant to run for a week each.  However it soon became clear that to meet FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's deadlines the three would have to run in parallel:
  1. The IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
    1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
    2. UK - $1.45 billion
    3. USSR - slightly less than UK quota
    4. China - less than USSR. 
    commission.  White chaired this commission.  It had four main committees:
    1. Quotas.  The French were livid with their allocation.  White had an additional $800 million for sweetening the disappointed but it took a promise from Morgenthau, that the French would become one of the five directors of the IMF to calm Mendes France.  The USSR is the Union of Soviet Socialist Republics. 
      was given a larger quota than their economy currently justified.  This was in-line with FDR's view of their future importance and his desire to partner with both them and the Chinese.  But whatever the US is the United States of America.   offered, the USSR demanded more!  Was the USSR being secretly coached by White?
    2. How the fund would operate
    3. How it would be managed
    4. Legal status is a publically accepted, signal that one possesses assets: wealth, beauty, talent, expertise, access & trust of powerful people; to be able to help others. 
      and form.  There was also a standing committee that would sweep up loose ends later on each day. 
  2. The World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
    commission.  Keynes chaired this commission.  The pressure soon undermined his already weakened heart is infective (bacterial) endocarditis.  The infection of the endocardium -- heart inner lining -- or the heart valves causes inflammation and can be fatal. 

  3. Other means of international financial cooperation.  This was used to catch problems that White and Keynes wished to avoid: Silver, Future of the BIS is the Bank for International Settlements based in Basel, Switzerland.  It was initially setup to manage Germany's war reparations payments. 
    .  
    • The Latin Americans being useful to the US position were able to obtain an IMF clause from White allowing "coconuts, or silver" to be used as collatoral by the IMF.  But the clause has never been executed. 
The 'blocked Sterling balances' were soon raised during the meetings of 'week one' by the Indians and Egyptians.  Robbins responded that the blocked balances were a private matter between His Majesty's government and the dominions and should not be raised at the summit.  Conway notes that a summit on the future world financial system would seem the perfect place to raise this issue but the dominions were cowed into submission.  Conway continues that it was never-the-less a clear indicator of the shift in power between the US, the UK and the UK's dominions. 

The Summit: week two
The discussions on the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
helped support White's plan by providing attractive facilities to keep countries interested and offset the unattractive discipline the IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
would clearly impose.  White provided the World Bank with $10 billion to help with redevelopment. 

Through his writing of the draft and chairing of the commission Keynes was able to transform the World Bank from this one time pot of money to an amplifier of private investment through making the World Bank function as a guarantor of the private funds.  Keynes was perplexed that the US continued to refer to this infrastructure as a bank. 

With Keynes busy chairing commission 2, his economist colleague, Dennis Robertson was left to participate on commission 1.  For political reasons the US had avoided associating the global currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
with the dollar in the Bretton Woods's drafts.  Robertson proposed explicitly stating that the dollar be tied to gold.  Keynes did not discover this update to the IMF plans until after the conference.  He never forgave Robertson.  The IMF eventually added SDR is Special Drawing Right, a global reserve asset used by the IMF.  SDRs can be freely exchanged for usable currencies.  The SDR is associated with the current value of a basket of currencies.  In 1969 this basket included: US dollars, euros, Japanese yen and pound sterling.  In Oct 2016 the renminbi will be added to the basket. 
s in line with Keynes's thinking.  Robertson's initial tie of the dollar to gold pushed the pound from the center of global currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
trades.  Eventually in the 1970s it destroyed the Bretton Woods agreement when President Nixon could not defend the dollar against the inflationary impact of the Arab oil embargo. 

The UK did manage to weaken the IMF constraints to protect the pound from the 'blocked balances' for a few years:
  • A five year transition was added to IMF membership. 
  • Countries were allowed some leeway to devalue without IMF constraints.  But these changes undermined the goals of the Bretton Woods agreement.  
Latin America used its leverage with the US to extend the charter of the World Bank and their position:

The Summit: week three
White proposed IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth.  The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s.  The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress.  The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities:
  1. US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds. 
  2. UK - $1.45 billion
  3. USSR - slightly less than UK quota
  4. China - less than USSR. 
wording that would guarantee to destroy the BIS is the Bank for International Settlements based in Basel, Switzerland.  It was initially setup to manage Germany's war reparations payments. 
'IMF membership is incompatible with BIS membership'.  Conway comments:
  • The BIS was associated with New York and London bankers who were enemies of the IMF.  
Keynes responded in anger is an emotion which protects a person who has been cheated by a supposed friend.  When the exploitation of the altruism is discovered, Steven Pinker explains, the result is a drive for moralistic aggression to hurt the cheater. 
to the BIS wording.  He rushed to Morgenthau and expressed his concerns but became seriously ill.  White responded by changing the wording to 'the liquidation of the [BIS] at the earliest possible moment.'  Keynes joked that this would be 'not very early.' 

White included IMF language that placed its headquarters in New York.  Conway explains the US is the United States of America.   was intent on resting away financial leadership aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
from London to New York.  Keynes was powerless to stop this with the presence of Latin American votes to push through any US position. 

USSR is the Union of Soviet Socialist Republics. 
continued to demand more concessions: especially from the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and provide reconstruction and development resources for projects in developing economies.
.  They were allowed control over their exchange rate for example.  And their request for a 0.5% concession when a country was partly occupied was granted.  In the main the US paid for the cost of these shifts. 

All participants signed off on the Bretton Woods agreement at the end of week three. 

Unmitigated Evil
There was an immediate campaign in the US is the United States of America.   to destroy the Bretton Woods agreement.  It was the focus of the ABA is the:
  • American Bankers Association.  
  • American Board of Anesthesiology. 
, supported by the New York Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses.  It setup:
  • At least 8 and not more than 12 private regional Federal Reserve banks.  Twelve were setup
  • Federal Reserve Board with seven members to govern the system.  The President appointed the seven, which must be confirmed by Congress.  In 1935 the Board was renamed and restructured. 
  • Federal Advisory Committee with twelve members
  • Single US currency - the Federal Reserve Note. 
.  Prior to the summit they offered the UK $3 billion if it would not back Bretton Woods.  Keynes said no to the gambit.  Having expected the summit to collapse, the ABA scrambled to warn Congress of the dangers of the agreement.  The administration went on a defensive publicity tour.  However, the public was disinterested and the House and Senate passed the agreement into law. 

After Bretton Woods was signed Keynes knew he must get more finances to stave off UK collapse:
Even before that occurred Keynes was asked by the UK to go back to the US and beg for more financing but the situation became suddenly more difficult:

Starvation Corner
Execution of the allied war plan destroyed infrastructure across Europe.  And the US is the United States of America.   was still blocking exports.  By the end of the war all this ensured:
FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's death shifted policy to President Truman who replaced Morgenthau, as Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
Secretary, with Vinson.  Vinson did not value White or Keynes.  Truman proposed terminating Lend-lease included a preliminary agreement and the act. 
  • Agreement included 8 articles:
    1. The US agreed to supply defense articles services and information as the President authorizes. 
    2. The UK will contribute to the defense of the US providing such articles it is in a position to supply.  
      • This resulted in the transfer of a cavity magnetron, the designs of the VT fuze and Whittle jet engine and the description of the feasibility of the A bomb.  As well as designs of rockets, superchargers, gyroscopic gunsights, submarine detection devices, self-sealing fuel tanks and plastic explosives. 
    3. UK can not transfer title of the goods and services without permission of the President. 
    4. Patent protected articles and information will be paid by the UK government when requested to do so by the President. 
    5. At the end of the emergency the UK government will return articles and information that has not been destroyed or used as requested by the President. 
    6. In assessing the articles to be returned the US will take into account articles already transferred to the US and accepted/acknowledged by the President. 
    7. The final benefits provided by the UK to the US in return for the aid will include:
      • No burden to commerce between the two countries
      • Promotion of mutually advantageous economic relations
      • Betterment of world-wide economic relations
      • Elimination of all forms of discriminatory treatment in international commerce
      • Reduction of tariffs and other trade barriers. 
      • Conversations to be held to determine in the light of governing economic conditions, the best means of attaining the objectives. 
    8. Agreement to take effect immediately.
  • Act to Promote the Defense of the United States, of March 1941 which superseded the neutrality acts. 
and while Vinson was happy to stage this process the administrator - Crowley cut the financing off abruptly which was an immediate issue to UK and USSR and had long term catastrophic effects on Bretton Woods and the United Nations operations. 

The UK quickly became the most indebted country in the world.  Still Keynes noted that this huge debt was an advantage in negotiations.  And the UK decided to hold the Bretton Woods ratification hostage to obtain an American loan.  Keynes argued there could be three paths taken by the UK leadership aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
:
  1. Austerity - retreat into a Sterling area which Keynes dismissed as isolation from the World economy and dependent on the cooperation of the dominions which was highly unlikely. 
  2. Temptation - Accepting a large costly loan from the US. 
  3. Justice - Keynes preferred option of demanding a gift of $3 billion from the US and then leveraging a very low interest loan of $5 billion justified by the heavy impact of war on the UK and a promise to accelerate the implementation of free trade within a year.  Once again this illustrated Keynes misunderstanding of the US political process.  And the politically savvy Chancellor Dalton was happy to leave the responsibility for failure with Keynes. 
In the subsequent meeting with the US Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
Secretary Vinson the initial US offer equated to the 'temptation' path that the Cabinet had already rejected.  And after White's input Vinson reduced the loan from $5 billion to $3.5 billion. 

Eventually the US fixed on an offer of $3.75 billion with 2% interest to be paid off by 2006 and full pound inter-convertibility one year after the start of the loan!  Prime Minister Attlee accepted the offer, abandoned the policing of the Empire and used the loan to:
  • Implement social security
  • Implement the National Health Service
  • Nationalize much of the infrastructure and industry of the UK. 

Onward Christian Soldiers
While the Soviet economists were positive about joining Bretton Woods, Molotov and Stalin were dubious.  Similarly to the UK, with the abrupt termination of Lend-lease included a preliminary agreement and the act. 
  • Agreement included 8 articles:
    1. The US agreed to supply defense articles services and information as the President authorizes. 
    2. The UK will contribute to the defense of the US providing such articles it is in a position to supply.  
      • This resulted in the transfer of a cavity magnetron, the designs of the VT fuze and Whittle jet engine and the description of the feasibility of the A bomb.  As well as designs of rockets, superchargers, gyroscopic gunsights, submarine detection devices, self-sealing fuel tanks and plastic explosives. 
    3. UK can not transfer title of the goods and services without permission of the President. 
    4. Patent protected articles and information will be paid by the UK government when requested to do so by the President. 
    5. At the end of the emergency the UK government will return articles and information that has not been destroyed or used as requested by the President. 
    6. In assessing the articles to be returned the US will take into account articles already transferred to the US and accepted/acknowledged by the President. 
    7. The final benefits provided by the UK to the US in return for the aid will include:
      • No burden to commerce between the two countries
      • Promotion of mutually advantageous economic relations
      • Betterment of world-wide economic relations
      • Elimination of all forms of discriminatory treatment in international commerce
      • Reduction of tariffs and other trade barriers. 
      • Conversations to be held to determine in the light of governing economic conditions, the best means of attaining the objectives. 
    8. Agreement to take effect immediately.
  • Act to Promote the Defense of the United States, of March 1941 which superseded the neutrality acts. 
the USSR is the Union of Soviet Socialist Republics. 
needed a $10 billion US is the United States of America.   loan and watched in frustration as the UK is the United Kingdom of Great Britain and Northern Ireland. 
and France were given loans.  Stalin shifted the Soviet Bretton Woods operations to Gosplan was the central economic planning agency of the USSR.   which had always opposed the agreement. 

US charge d'affaires George Keenan's conclusions cemented the rupture with the USSR, recommending the US use containment and threat with the USSR instead of FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's policy of collaboration and alliance. 

Treasury is the department of the treasury.  it is a federal government executive department created by Act of Congress in 1789 to manage government revenue.  The Secretary of the Treasury is a Cabinet officer.  To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt. 
Secretary Vinson hosted the Atlanta Georgia based Bretton Woods signing celebration but the USSR didn't attend.  The meeting reflected a transformed situation:
The US did indeed use the IMF and World Bank to advance its policy agenda.  And the infrastructure was not working effectively.  White was shocked when:
  • A prospective loan from the World Bank to Poland was vetoed by the US.  
  • The institutions were running out of money.  Vinson's high salaries consumed 65% of the budget.  White left the Truman administration. 
The Bretton Woods infrastructure did not perform as expected by Keynes and White.  White watched in dismay.  In his personal notes he developed proposed fixes for the problems he identified:
  • He noted the $35 peg between the dollar and gold was too high.  He wrote that it should be $20 to stop the global economy from starving from a shortage of dollars. 
  • He felt the design of Bretton Woods infrastructure was out of line with the split between the US and USSR.  He felt this demanded the introduction of an 'international medium of exchange' similar to Keynes's bancor plan.  
The global situation became increasingly desperate with:
  • Europe falling towards another depression
  • Civil wars in China, Greece and Palestine.  The IMF had few resources to help. 
The Truman administration responded by following the Truman Doctrine of active intervention to inhibit the spread of communism.  Secretary of State George Marshall announced a plan to finance the collapsing economies that were at risk of adopting communism.  Finally this Keynesian response started to turn the situation around. 

White was called to testify before a Congressional committee.  While he defended his position he was stressed is a multi-faceted condition reflecting high cortisol levels.  Dr. Robert Sapolsky's studies of baboons indicate that stress helps build readiness for fight or flight.  As these actions occur the levels of cortisol return to the baseline rate.  A stressor is anything that disrupts the regular homeostatic balance.  The stress response is the array of neural and endocrine changes that occur to respond effectively to the crisis and reestablish homeostasis. 
  • The short term response to the stressor
    • activates the amygdala which: Stimulates the brain stem resulting in inhibition of the parasympathetic nervous system and activation of the sympathetic nervous system with the hormones epinephrine and norepinephrine deployed around the body, Activates the PVN which generates a cascade resulting in glucocorticoid secretion to: get energy to the muscles with increased blood pressure for a powerful response.  The brain's acuity and cognition are stimulated.  The immune system is stimulated with beta-endorphin and repair activities curtail.  But when the stressor is
  • long term: loneliness, debt; and no action is necessary, or possible, long term damage ensues.  Damage from such stress may only occur in specific situations: Nuclear families coping with parents moving in.  Sustained stress provides an evolved amplifier of a position of dominance and status.  It is a strategy in female aggression used to limit reproductive competition.  Sustained stress:
    • Stops the frontal cortex from ensuring we do the harder thing, instead substituting amplification of the individual's propensity for risk-taking and impairing risk assessment! 
    • Activates the integration between the thalamus and amygdala. 
      • Acts differently on the amygdala in comparison to the frontal cortex and hippocampus: Stress strengthens the integration between the Amygdala and the hippocampus, making the hippocampus fearful. 
      • BLA & BNST respond with increased BDNF levels and expanded dendrites persistently increasing anxiety and fear conditioning. 
    • Makes it easier to learn a fear association and to consolidate it into long-term memory.  Sustained stress makes it harder to unlearn fear by making the prefrontal cortex inhibit the BLA from learning to break the fear association and weakening the prefrontal cortex's hold over the amygdala.  And glucocorticoids decrease activation of the medial prefrontal cortex during processing of emotional faces.  Accuracy of assessing emotions from faces suffers.  A terrified rat generating lots of glucocorticoids will cause dendrites in the hippocampus to atrophy but when it generates the same amount from excitement of running on a wheel the dendrites expand.  The activation of the amygdala seems to determine how the hippocampus responds. 
    • Depletes the nucleus accumbens of dopamine biasing rats toward social subordination and biasing humans toward depression. 
    • Disrupts working memory by amplifying norepinephrine signalling in the prefrontal cortex and amygdala to prefrontal cortex signalling until they become destructive.  It also desynchronizes activation in different frontal lobe regions impacting shifting of attention. 
  • During depression, stress inhibits dopamine signalling. 
  • Strategies for stress reduction include: Mindfulness. 
at the hounding he received from Congressman Richard Nixon and subsequently suffered a series of heart attacks resulting in his death in 1948. 

The Bretton Woods System
A UK is the United Kingdom of Great Britain and Northern Ireland. 
capital reserve crisis in 1947 was stimulated by the enacting of sterling convertibility.  $6 billion per year of currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
gushed out of the UK.  The US loan was rapidly exhausted.  Bretton Woods had to be transformed.  UK Chancellor Dalton cancelled convertibility and followed up with a special budget full of austerity measures and then resigned.  The Labour Party became stuck with a reputation for economic mismanagement. 

Investors escalated the problem pulling money from: France, Italy and Germany.  By 1948 France devalued. 

Even with the Marshall Plan loans Europe had to devalue against the dollar.  The UK devalued by one third.  And the process had been totally disorganized. 

Then in 1950 the Suez crisis encouraged the UK to overspend on its military response.  The US is the United States of America.   eventually stepped in to bail the UK out again. 

The UK devalued once again in 1967. 

The 1947 collapse showed Keynes and White to be very optimistic in their thinking:
The impression left on Europe's leaders aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group.  John Adair developed a leadership methodology based on the three-circles model. 
of the 1947 UK devaluation inhibited further use of the IMF facilities.

Western Europe setup the European Payments Union which instituted barriers to capital movements in and out of Europe.  The US oriented by the Truman Doctrine backed the move.  Indeed it used the Marshall Plan infrastructure (ECA is economic cooperation administration which was a US government agency set up in 1948 to  administer the Marshall Plan. 
and OEEC is the organisation for European economic co-operation.  It emerged from the Marshall Plan, being setup to supervise the distribution of aid based on the following principles:
  • Promote co-operation between participating countries and their national production programmes for the reconstruction of Europe. 
  • Develop intra-European trade by reducing tariffs and other barriers to the expansion of trade. 
  • Study the feasibility of creating a customes union or free trade area. 
  • Study multi-lateralisation of payments, and
  • Achieve conditions for better utilization of labor.  It was superceded in 1961 by the OECD. 
) to encourage the development is a phase during the operation of a CAS agent.  It allows for schematic strategies to be iteratively blended with environmental signals to solve the logistical issues of migrating newly built and transformed sub-agents.  That is needed to achieve the adult configuration of the agent and optimize it for the proximate environment.  Smiley includes examples of the developmental phase agents required in an emergent CAS.  In situations where parents invest in the growth and memetic learning of their offspring the schematic grab bag can support optimizations to develop models, structures and actions to construct an adept adult.  In humans, adolescence leverages neural plasticity, elder sibling advice and adult coaching to help prepare the deploying neuronal network and body to successfully compete. 
of welfare states.  It was not until 1961 that the countries were in compliance with the IMF agreements.   

FDR is President Franklin Delano Roosevelt.  He is notable for his contributions to the US CAS:
  • New Deal strategies including:
    • SSA
    • FFDCA 
    • IRC
  • Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.  
  • Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.  
's broad vision of global infrastructure had included the United Nations and a global trade infrastructure.  But the trade infrastructure withered until 1995 with the emergence of the WTO is the World Trade Organization. 


After the unexpected sudden ending of the Marshall Plan the IMF and World Bank started to be used as initially envisioned.  The European Payments Union was wound up and the European Community was initiated at the treaty of Rome in 1957. 

As the European and Japanese economies started to flourish the dollar shortage ended.  Prior devaluations had made the expanding and low cost Europe an attractive target for American investors.  Germany and Japan's high value export strategies initiated a long period of trade surplus with the US.  By 1969 the US share of economic output had dropped from 35 to 27%. 

The dollar gold equivalence written in to Bretton Woods now became a terminal problem for the US led system:
Epilogue
The end of Bretton Woods allowed a resurgence of the international finance industry which leveraged the effects of floating currencies is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
to capture huge profits.  The foreign exchange market is still growing.  The US responded to the resurgence of London's financial center by repealing Glass-Steagall Act of 1933 prohibits commercial banks from engaging in the investment business.  , giving the industry a further boost to become 8% of American economic output as the US financial infrastructure re-integrated. 

But Conway notes that the Bretton Woods period from 1948 to the early 1970s reflected a period of unusual strength in the world economy.  He frames the point via a Bank of England study:
And social gains occurred too:
Bretton Woods was a success in spite of the limitations designed into it:
The demise of Bretton Woods allowed floating exchange rates to occur.  Currencies is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
became worth what people thought they were worth! Free market economists including Milton Freedman had been advocating this move for some time.  The economics changed:
  • Economies that used Keynesian spending no longer had the anti-inflation anchor of gold.  The spending resulted in both troubling inflation and stagnant output. 
  • A variety of alternative models were tried to help manage the international money flows:
    • Monetarism - by the US and UK; the UK still had more failures and requested IMF bailouts in 1970s. 
    • Currency boards
    • Exchange rate mechanisms - Europe locked their currencies together in a 'snake' that was called EMS , ERM and eventually developed into the single euro currency union.  By the 1990s the UK had moved to join the ERM, in effect locking its economy with the German.  But the two economies differ in strategy and operation and with no hot money capital flow controls George Soros and other investors pulled money from the UK.  Under massive attack the UK along with Italy crashed out of the ERM and floated their currencies. 
    • Inflation targeting - was subsequently adopted by the central banks.  The UK also freed its central bank from political control.  However, in the 2008 crisis inflation targeting provided no help. 
Countries across the globe opened up their economies to trade and capital flows in a way not seen since the early 20th century: 
Conway argues that one single cause for the 2008 recession is unlikely.  He notes:
  • Economists made intellectual mistakes
  • Financial regulators made misjudgments
  • Investors took missteps
  • But he suggests the world's monetary system was mangled!  Governments were struggling with the same issues that were discussed at Bretton Woods:
Bretton Woods allowed politicians to constrain member countries.  But there has been little in the way of an equivalent control framework since.  Conway notes the:
Conway asks why this problem has not been dealt with.  It has been suggested that today:
  • There is no vision of the form Keynes supplied.  
  • No one wants to suffer the potential turmoil that could be unleashed. 
He sees the US and China as key because: China is still building up surplus dollars - now $17 trillion; so China does not want the US to default, devalue or inflate.  The US budget deficit is still growing and there are huge household debts.  This is why Paul Volcker says the US is no longer viewed as all powerful. 

Conway reviews the present contributions of the IMF and World Bank.  He notes the IMF made its largest loans ever during the Euro crisis to Greece, Portugal and Ireland.  Still it seems odd that the world's richest nations were obtaining loans from the developing world! 

Previously the IMF had helped developing countries establish their central banks.  But later in the 1980s and 1990s both the IMF and World Bank were seen pushing US policy.  Leaving the broader global community wondering why they should back the World Bank or the IMF.  Instead they are likely to build defenses closer to home. 

Volcker argues that any new equivalent to Bretton Woods must be more distributed and built from the bottom up by each country making its domestic economy robust and then cooperating with each other. 
Oliver Blanchard argues that there must be some entity that backstops the liquidity of central banks.  But Conway notes that in the 2008 crisis the central banks worked in cooperation using their network of swap lines are agreements between central banks to swap currencies so that they can provide required currencies to a partner bank needing additional currency.  For example a swap line provides access to additional currency when the partner is suffering a liquidity crisis. 
.  Blanchard argues for more capital controls since he felt much of the investor activity prior to 2008 was counterproductive.  Still Blanchard believes the global infrastructure is too complicated for there to be a big vision.  Instead he says to advance step-by-step. 

Conway argues that history has shown fixed exchange rates are problematic.  As such the euro is anathema:
Conway accepts that Bretton Woods was a failed concept but it performed better than any equivalent before or after it.  And he says it was limited in scope, imperfect and short lived.  It would be very difficult to setup without another catastrophe.  And its designers have lost some credibility:
  • White for the FBI investigations
  • Keynes for problems with public spending during the 1970s and 1980s. 


This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
CAS theory
models an economy as a network of
Plans are interpreted and implemented by agents.  This page discusses the properties of agents in a complex adaptive system (CAS). 
It then presents examples of agents in different CAS.  The examples include a computer program where modeling and actions are performed by software agents.  These software agents are aggregates. 
The participation of agents in flows is introduced and some implications of this are outlined. 
agents
.  Framing Bretton Woods with CAS models:


Conway's revealing book shows how global fiscal power transferred from Great Britain to the US is the United States of America.   after the First World War.  The shape of the financial infrastructure designed and built in response to the aftermath of the 1914 to 1918 war still influences today's global economic
This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
CAS





























































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This page looks at schematic structures and their uses.  It discusses a number of examples:
  • Schematic ideas are recombined in creativity. 
  • Similarly designers take ideas and rules about materials and components and combine them. 
  • Schematic Recipes help to standardize operations. 
  • Modular components are combined into strategies for use in business plans and business models. 

As a working example it presents part of the contents and schematic details from the Adaptive Web Framework (AWF)'s operational plan. 

Finally it includes a section presenting our formal representation of schematic goals. 
Each goal has a series of associated complex adaptive system (CAS) strategy strings. 
These goals plus strings are detailed for various chess and business examples. 
Strategy
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This page uses an example to illustrate how:
  • A business can gain focus from targeting key customers,
  • Business planning activities performed by the whole organization can build awareness, empowerment and coherence. 
  • A program approach can ensure strategic alignment. 
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