Proceedings of "Foreign Economic Policy, 1973-1976" Conference Available Online

Posted by Lindsay Krasnoff
April 7, 2011
Economic Summit Meeting at the Chateau de Rambouillet, 1975

The United States' ability to shape international economic policy during the mid-1970s, a time of multiple global economic crises, perceived American weakness, and great Congressional scrutiny, is the principal theme of the recent Foreign Relations of the United States volume on Foreign Economic Policy, 1973-1976. Policymakers in the Nixon and Ford administrations recognized that economic policy was an important element of diplomacy. Since the founding of the republic, U.S. foreign policy has often reflected the nation's trade, commercial, and economic interests. Yet, as the unraveling of the post-war economic order by the 1970s indicated, the United States had to think differently about the intersections of foreign and economic policy when changed circumstances disrupted existing relationships with partners and competitors alike. The challenges posed by the emergence of a multi-polar world for the United States and its foreign policies provided a wide umbrella for the proceedings of the recent Office of the Historian conference, "Foreign Economic Policy, 1973-1976," co-hosted by George Mason University School of Public Policy.

The inaugural session of the Foreign Relations of the United States (FRUS) Special Conference Series, the scope of the conference's roundtable remarks and the keynote address given by Under Secretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats demonstrate how a "niche" topic, such as foreign economic policy, can shed light on a diverse range of subjects.

The "Foreign Economic Policy, 1973-1976" conference touched on several storylines. One narrative arc focused on how increased globalization forced the United States' economy--and those of other industrialized countries--to become more interdependent. Another theme was the evolving role of the U.S. dollar as the fixed exchange rate system envisioned at the 1944 Bretton Woods conference ended and a new system of flexible exchange rates began. As Under Secretary Hormats noted, technical economic and financial issues often became entangled with broader questions of national prestige.

Yet, the Foreign Economic Policy, 1973-1976 volume, as conference participants pointed out, speaks to more than just economic policy. The passage of the Trade Act of 1974 and the issue of the Jackson-Vanick Amendment, which tied human rights to U.S. trade policy, illustrated the tensions inherent between the roles played by Congress and the Executive Branch in crafting foreign economic policy. Conference participants noted how documents from Foreign Economic Policy, 1973-1976 demonstrate how the Nixon and Ford administrations worked with Congress in an era of heightened legislative scrutiny.

Panelists also addressed other important subjects as they discussed Foreign Economic Policy, 1973-1976. For example, documents in the volume shed light on the United States' perspective on European integration and whether Nixon administration officials felt that a unified Europe would serve U.S. policy objectives. In addition to gleaning greater insight into the dynamics of U.S.-European relations, Foreign Economic Policy, 1973-1976 documents and the conference's roundtable remarks provide a richer understanding of the U.S.-French relationship. The interactions between the Ford administration and their French counterparts in creating the G-7 and responding to other economic crises are instructive on many levels, and indicate the importance of creatively developing new solutions to pressing problems.

In listening to the audio files or reading the transcripts from these discussions, one gains a greater sense of the difficult obstacles and questions that faced U.S. policymakers as they grappled with the intersection of foreign economic policy and foreign policy during the 1970s. As noted by conference participants, learning more about foreign economic policy during the uncertain 1973-1976 period is also useful in addressing the challenges of the present.

The proceedings of this conference are available online through the Office of the Historian's website, http://history.state.gov/conferences/2011-foreign-economic-policy/audio-transcripts.

Comments

Comments

Jim
April 8, 2011

Jim writes:

In this overview, they should have mentioned that the so called "gold standard" of backing up the financial market with gold (treasury) was eliminated. This has been a topic of importants even today whether the U.S. should go back to the gold standard or not. In my opinion, our market became to large and thus was hampered by this standard. Also this standard would not have helped our economic situation due to the U.S. going through stagflation during this period. Does anyone agree or disagree with me? Also Keynes argument concerning monetary policy was being strongly disputed around this time.

John 3.
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Canada
April 8, 2011

John in Canada writes:

Part 1 of 3

I agree with you Jim. I studied on my own, economics and accounting over 20 years ago. It left me with an understanding of the financial markets that few people seem to get.What is happening today is a natural byproduct of the financial system. In short the markets are behaving exactly how they were designed to operate.As for the gold standard – I completely agree with you – it will not work – But there is another way.

I have been thinking on this problem for years. Like most people I approached the problem in the wrong manner -The trouble is – most people lack an understanding of finance (even politicians) who to talk to?

I know there is a way forward, I know I way that would help not only America but every nation on earth. Sorry for the cut and paste (from previous digital scratches – I am happy to share Ideas)

First our current system in brief (again it is difficult to write something when the audience has a varied understanding of our financial system – any question post and I will try to answer)

Economic issues are of great importance these days. What worked yesterday for us, it seems clear in our future will fail us. To understand the situation we are in today (finances) I would suggest we revisit some very, very basic principles that seem to me at least ignored. It’s all about the money, the cash. This is how it has always been. This is where it starts with our cash, our money. If we fail to a) identify it and b) provide real solutions – our society will crumble, war unavoidable.

Most people use money every day, they don’t think beyond need or want of the stuff – truly shocking.

This is not rocket science; you need no economics degree to understand it. You may know it, but I bet you don’t understand it. Most don’t. Let’s start with following the life of a $ bill. Central bank – national banks – business – consumer. OK first stop central bank, are we talking about a magic well of cash, a secret river of money – Heck no, we are talking about giant printing presses. We as people make the stuff. Now if you’re in the business of making money (no pun intended) you need to push, sell or move your product. Why? To make more money that’s why. It’s what it’s all about. If my product is money who is my buyer? The national banks are the buyers.

Let stop here for a moment and look at the transaction between the central bank and the national banks. The central bank charges interest on the creation of that $ bill, a charge to the national banks for the printing of money. You know that interest rate you here about on the news that you will never see for your own loans.

Now the national banks are in business for what? That’s right to make money. Now it’s obvious that if the national banks must agree to pay the central bank money (what they barrowed + plus interest). It is clear that the national banks in order to earn more money must charge their customers more money right? 1st major problem is here and I hope you see it for yourself, don’t worry if you don’t .for some strange reason when it comes to cash people’s brains stops working. Let me put it to you this way. You’re an army general. You need ammo. The only place that you the general can get his ammo from is me (central banks). I say, general I will generously give you 1000 rounds of ammo and I ask that you return to me 1200 rounds of ammo. Deal? If the general was wise he would go carve himself a spear. Why? If the only place I can get ammo from wants me to return more ammo than I take (plus what I take) then how do I do this? You become permanently indebted. Debt is the only way. The only way to pay me back would be to come borrow more and more and more. Stop debt, you stop cash creation – your country fails. Now, we live in a big world with many central banks and many national banks. This very large network globally operates on this principle. This allows us to trade with each other. With what? More cash. Because of the enormous size of this network the 1st major problem is in a way hidden, and in a way not. Let me explain and if you could entertain for a moment the notion that ALL debt belongs in 1 giant bubble (personal, corporate, national debt). If you’re in debt it is only natural to want to be out of debt, right. Going back to the general and the ammo problem, he may not think that he has a problem. He may be thinking that if he could invade a country XYZ. Country XYZ has ammo. If the general is successful he may be right and could pay back his debt to me if the general is wrong – more debt, either way I win. If the general is successful in his campaign against country XYZ . XYZ would be left with a greater debt load and greater instability. We then pay for this in aid and other such business. Your taxes rise. One way or another we constantly pay – every year losing purchasing power – every year closer to economic death. Every year governments have less and less money to operate.

John 3.
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Canada
April 8, 2011

John in Canada writes:

Part 2 of 3

Who cares you say. Well forget about ammo and generals and now think of trade and business (economic war) If a country is not collecting cash by conducting foreign trade, that country will spiral into debt. Why do you think china appears more powerful at the moment?

The reality is if you don’t take money from foreign money systems by whatever means - it is impossible to pay down the debt of a nation.

US/China is a perfect example. The reality is that every nation, at least economically is at war with every other nation, even allies. If America trades USA made material with china, Canada, Brazil – the USA could then reduce its debt, as long as the trade is large enough to counter the creation of cash + interest compounded, trade deficits.

What then happens in Canada, china and Brazil – these countries effectively take the debt bubble that the USA once had by way of trade. Around and around it goes with a giant debt bubble at its core, growing and growing. Debt never truly goes away.

When a business or municipality or an average person takes debt upon themselves; what happens very simply is that a chunk of that giant debt bubble becomes a personal responsibility. You can pay it off and be free from personal responsibility but the debt actually gets shunted somewhere else. You will end up paying higher taxes to cover the cost of the debt that you thought you paid off on that car loan, student loan, credit card or whatever debt. One way or another everyone is paying for debt directly or indirectly that can NEVER be paid. Responsibility is shifted back and forth that’s all. If you cut ALL spending and tax everyone 100% you cannot eliminate this debt. Nations that ignore the reality of their people’s lives in order to chase debt down the rabbit hole – Are fools IMHO.

The 2nd major problem with our financial system rests in the national banking sector and I’m going to get to the point quick on this one. The national banking systems globally operate at its core like this –
a national bank can borrow 1 million dollars from the central bank at 1% interest rate (interest is variable around the world, just keeping it simple) Because of the beauty of the system they operate the national banks require a very small reserve of cash to carry significant amount of both debt and the assets you think you own or owe. Globally the cash reserves of banks range in requirements but can be as little as 4%. For now I will be gracious and assume my bank is required to maintain a 10% cash reserve to debt or assets. Let’s look at this way.

You deposit with the bank a million dollars and have a home mortgaged with the same bank; the home is worth a million also. That bank requires only a 10% cash reserve about 200K assuming the requirement of 10% to back what you think is 2 million is observed. Catching on?

Try this one on for a moment – you’re the bank. You borrow 1 million from the central bank and now again assuming the 10% requirement, you the bank can now generate 10 million in new credit (debt) and charge interest ( you can insert your mortgage, credit debt interest you pay here)

So the bank pay little for a million and turn it, if by magic into 10 million, charging massively inflated interest on money that does not exist. You might say hay if I have 100 bucks in the bank, I could use my debit card, the system works. I’m not talking about what people in a society agree on collectively to conduct their trade. I am talking about the fact that physical cash does not exist to cover your assets or your debts.

Cash is the oil and there is not enough. If the USA could shrug off debt, who wants it? Any takers for a few trillion in debt. The fact is this debt has to be moved somewhere. Let’s look at holders of US debt, say china – sitting pretty on mountains of greenbacks clearly illustrated buy the debt load of the USA. Or are they sitting pretty? Not likely, you see Chinas greenbacks created by US debt consumption are worth nothing if America was to say collapse. China and the USA are locked into something I think neither truly understands. Throw in all the little fish in the world all doing the same thing- we got problems. A game that even when you win you loses.

John 3.
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Canada
April 8, 2011

John in Canada writes:

Part 3 of 3

So it’s like a balancing act that eventually collapses. Seriously do people believe you can create imaginary currency, charge massive amounts of compound interest on non existing money, while expecting cash to be paid in return? Put it this way if tomorrow we woke up and with the cash supply today (all of it) tried to pay are debts we could not.

What you think your worth; you’re not. The markets are doing what they are designed to do. Screw the debt ceiling – If you fail to lift the debt ceiling then you are essentially stopping the creation of money and your problems are compounded. At the end of the day you can’t pay down the debt under the current structure. So why play a game we all lose – even the banks.

Imagine if YOU could take 100 bucks and by magic turn it into a grand. Would you be in debt? Would you ever go bankrupt? The banks collapsed. What hope do you have at paying your debts when the banks your indebted to a) can’t make it work themselves. B) Your ability to pay down your debts depends on the creation of cash, and that is up to ultimately to the banks again.

If the debt ceiling is not raised, America is screwed. Forget talking of business and the consumer aspects of our financial system (things become direr), no point until we get to grips with what we have at the national bank – central bank level.

Tighten your debt belts all that you want; it will do nothing but destroy America.

Good times, bad times, bubble or bust – debt accumulates. Why?

It is time for a far more robust, balanced, complex system that works.77

Now for options that will kick the globe into gear beginning with America.

America must connect with its founding values. FREEDOM

This talk of cutting for debt is pointless. Maybe a silver bullet won’t do the trick. But better ways exist. How about 3 bullets?

Better ways exist without cutting anything while at the same time destroying debt, increasing profit (even for the banks) and quality of life for ALL Americans and beyond. The secret is in honoring freedom.

Take everything that makes a society a society –I mean everything – Now imagine if you will all of it jammed on 1 single highway- government, industry, finance, health, education, military, taxes, – all of it.

This is what we have now. An overcrowded highway in every way. The answer is not to cut anything. Create! Create! Create!

Create more highways (don’t clone the first). Remove selective elements from the first highway onto different highways so to speak. A type of synergy can be obtained with each highway working in tandem with the others driving unlimited growth without poverty.

I am vaguely describing a 3 pronged system (beautifully complex and adaptive and different for every nation in application).

Perpetual motion may elude scientist but the various structures we create for society to operate are by and large not subject to the same physical laws.

Look at it this way – governments worldwide say the recession is over, you’re just not feeling it yet. What a bunch of BS – when it’s over you won’t feel it. Technically in math terms it’s over, maybe. The reality it isn’t.

Every nation on earth runs on this “single highway model” in the 50s it worked – now it does not and will not work moving into the future.

You won’t find a play book on this, you get to write it – can’t get any bigger than that.

The president wants you the people to go big – demand the pathways so you can.

Bucket loads of opportunity exist - seize it.

It is much easier – face to face using manipulative – most people can understand and conceptualize better this way. Face to face it would take me potentially hours based on the listeners understanding – On a blog – I haven’t bothered trying until today.

.

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