Photo: Taken from RT.

In 1900, US President William McKinley signed the so-called “Gold Standard Law” that defined the US dollar for a certain weight in that precious metal. This forced the Treasury Department of that country, which serves as the central bank, to issue equivalent paper money printed and always backed by gold kept in its coffers. Thus, a trust was established in that money that was only dependent on how much gold one could have to back it up.

That also meant that the government of that country was tied to quantifying what it printed on paper, which encouraged people to trust it.

The essential factor for anything to be money and for its banks is that ALL economic actors TRUST them.

It also involved a very strict and complex tax system, enforced by law, which even became the only effective tool for some control of the underground economy and those who ran it in the 20th century.

Like any central action of a government regarding something as special as money, this had many ups and downs during the first half of that century. The great disaster of the 2nd. World War left the entire world in ruins, but the US economy was the least affected and many claim that it even emerged stronger. The international agreements that at the end of that conflagration made up the so-called Bretton Woods system reestablished the gold standard to support the dollar and thus turned this currency into a reference for universal monetary exchange. This brought immense benefits of all kinds to the local economy. However, its own internal imbalances and the wars in which the United States became involved, particularly Vietnam, made it impossible in the long run to sustain support

for fixed

dollar prices for gold.

Then the so-called “Nixon shock” appeared in 1971. This consisted of

exchanging gold as a backup for the US dollar for the country's own economy.

If you were confident that a dollar could buy anything, you were indifferent to whether or not there was gold in that country's coffers to back it up. Furthermore, that gold could be bought at the market price, because it was de facto floating.

So that government became incredibly empowered because they no longer had to care if there was more or less gold in their reserves. They only had to ensure that many more banknotes were not printed or many more virtual values ​​were generated than the economy itself could support without devaluing too much.

Control of the currency and a large part of the economy thus passed to the credits granted by banks for any transaction of value.

Benchmark interest rates for loans are set by the Treasury Department. If this puts them higher or lower, they make the dollar more expensive or cheaper. That then becomes a tool to maintain the currency at acceptable exchange values. And so the capitalism of the so-called “free market” maintains more or less strict control of the economy with money that can always acquire the value necessary to save it.

This “ordering” obviously led to an effective and more or less gradual devaluation of the dollar since the 1970s.

This did not affect people too much because internal salaries also increased, although almost always in a smaller proportion. An iconic cola drink used to be purchased, without the bottle, for $0.05 and today it can cost up to $1.25 in the supermarket under the same conditions.

The dollar in 2024 is worth about 25 times less than the dollar in 1960!

People continue to buy that soda because the price has always been at the level of purchasing power and determined by supply and demand, like almost all prices in this world. Other patterns give more, others less, devaluation for the dollar. By the way, the glass bottle could then be recycled for $0.02 and there were those who made a living collecting them.

Let's take as another illustration the economic crisis in Mexico in the 80s of the last century. It began to manifest numerically in 1982, when the Mexican government was forced to declare suspension of payments on its external debt, which triggered a series of events that led to the devaluation of the peso. This accelerated in 1985 when it was decided to abandon the fixed exchange rate system and allow the peso to be freely valued, or “float,” in international markets. From around 25 pesos per dollar in 1982, it reached around 3,000 per dollar in 1986. The effects of the crisis were disastrous for the economy. But

only after this monetary measure was the government able to implement actions to stabilize it

, because with 3,000 pesos any entity could do whatever was necessary, both import goods and services and sell them with the consequent creation of wealth and its due evaluation. If they had kept the artificial exchange rate of 25 to the dollar, but inoperable, the economy would have spiraled downwards, with hunger and consequent insurrections.

It is clear that “monetary regulations” are a key instrument to govern the modern economy. But the most important thing is that money is not just a sign of wealth, as it usually appears to us when we cannot buy something without having enough for it.

It is an entity whose management allows any modern economy to be governed

, whether for the interests of an elite of powerful capitalists or those of a government of the entire people. Elites do not have to be advised to respect the laws of money. They follow them to the letter when they have the power and only modify them when it is possible and convenient for them. Care is always taken, of course, not to affect the unlimited liberating capacity and trust that is intrinsic to this universal economic tool.

Havana, February 11, 2024