How “Trade Without Currency” Can Work

The strength of the 1945-1965 Bretton Woods System, LaRouche wrote in 2000 in the above-mentioned essay, lay in the fact that the “U.S. dollar’s strength as a reserve currency, was based upon the assurance that the current obligations against the U.S. dollar would be matched by the combination of an export-surplus plus gold bullion at a standard, fixed price for monetary-reserve gold. The gold-reserve system worked, because it was defended by protectionist and related regulatory measures, both internationally, and within the relevant nations themselves. It was the physical strength of the U.S. economy, as measurable per capita, a strength measured in terms of rates of growth of physical productivity per capita and per square kilometer, a strength expressed as periods of high rate of increase in hard-commodity forms of capital formation, which was crucial for the way in which the U.S. economy performed during the initial two decades of the post-war monetary system. This physical strength, matched with war-torn Europe’s needs for both expanded volumes of U.S. agricultural products and machine-tool categories, enabled U.S. credit to stimulate a rate of growth of physical productivity, per capita, in western Europe, a growth from which Europe obtained the means to meet its obligations to the U.S….”

And further: “This had been President Franklin Roosevelt’s intention for post-war U.S. aid to nations and peoples he intended should be liberated from the colonialist systems and legacies of Portugal, the Netherlands, the British monarchy, and France. Roosevelt detailed infrastructure-development for Africa as an example of this policy. That policy, as it had been intended by Roosevelt, should become the basis for new forms of cooperation between those sections of the world’s economy which have the ability to provide advanced technologies, and less developed regions. This policy orientation provides the mission-orientation which a new, fixed-exchange-rate, world monetary system must adopt.”

An improved Bretton Woods system, LaRouche went on, could be established in which parities among national currencies would be determined by a basket of commodities, where the term “commodity” is intended beyond the strict meaning of natural resources. LaRouche considered “constructing a synthetic unit of account which is based upon an agreed basket of hard commodities. Thereafter, as currencies fluctuate, it is the currencies, not the commodities, which are given implicitly adjusted values, as based upon the basket of commodities used to define the unit. Such a synthetic unit could serve as the accounting-system of an international credit facility, as, in that sense, the basis for creating a kind of successor to Special Drawing Rights. Thus, in the matter of medium- to long-term capital loans for hard-commodity investments, the relevant currencies are priced according to the basket of commodities as a standard. The loan is made in these units, not currency-prices; however, the exporter is credited with that number of synthetic units at the time the product is delivered, and repayments of the loan are determined by the price of the relevant currency, in those units, at the time that specific payment is due. Thus, in effect, a barter-like system of medium- to long-term lending of hard commodity product, is used to approximate the ‘gold-reserve plus basket of commodities exported’ system which operated in relevant Transatlantic relations during the 1945-1965 interval of a fixed-exchange-rate system.“