Yes, there are economics geeks. Mr. Hallock and I are two of them. As international affairs majors, we were required to study two years of economics: macro, micro, international trade, and international finance. And each of us took a few additional electives. So when we decided to go up Mount Washington on the cog railway this week, it seemed silly not to go to the Omni Mount Washington Resort for a tour. Why? You might know the Omni better as Bretton Woods.
Still nothing? Maybe you know it for its skiing, which I have heard is incredible. But to me Bretton Woods will always mean the United Nations Monetary and Financial Conference of 1944, which set up the Bretton Woods System and created the International Monetary Fund and part of the World Bank at the end of World War II.
Forty-four Allied nations came to northern New Hampshire to discuss how to stabilize postwar monetary systems. (It seems a little cocky to plan for your victory a year early, but the D-Day landings had just been a surprising success.) From the hotel tour guide, we learned that the international delegates and their subordinates were instructed not to bring their families. The hotel had just been bought by the US government after being thoroughly run down and maltreated by the founder’s heir. The government had “fixed” everything by painting it all white, even the Tiffany stained glass, but they were not ready to put up thousands of guests.
Guess what? The delegates brought their families, of course. Of course! So the hotel employees had to sleep in tents and other temporary quarters to make room. There were originally only 230+ rooms in the Mount Washington Hotel because they had all been designed as huge suites, since the wealthy families of the Gilded Age stayed here for the whole season, from Memorial Day to Labor Day. (These were the people who did not have their own “cottages” in Newport, of course.) Between 44 countries’ top delegates, their aides, and all their loved ones, the place was packed to the rafters.
But back to economics: the delegates agreed to peg the world’s currencies to the dollar, the only currency they considered a strong enough shore of value to hold true in the upcoming tough times. The US agreed to make the dollar convertible to gold at a standard rate of $35 an ounce. If you are looking for the moment when the United States became a global economic superpower, this would be it.
Now, accounting for inflation, that peg price to gold is only about $485 an ounce in 2016 dollars, which is a third of today’s (8/25/17) spot price of $1300 an ounce. The US could not keep the dollar strong enough to hold its own against rising gold prices, especially during the economic crises of the late 60s and early 70s. In 1971 President Nixon announced that the US dollar would no longer be convertible to gold.
This spelled the end of Bretton Woods and the gold standard. Whether or not you think this is a good thing, it is an interesting conclusion to the gold-bug-versus-silverite debate that dominated the election of 1896. If you were to travel back in time to the Gilded Age and announce this was where we would end up, they would laugh in your face and call you insane. US “greenbacks” are now fiat currency, backed only by the world’s faith in their value, nothing more. (And, well, petroleum, since members of the OPEC cartel agreed that oil would be bought and sold in dollars, starting in 1971. Convenient, eh?)
The monetary conference was not the only interesting part of the Bretton Woods tour. The Cave Grill in the basement used to be a speakeasy! They paid fourteen-year-old boys to keep a look out for cops. Supposedly, if the authorities arrived, you were supposed to throw your whiskey in the barrel, and it would be hidden in the floor. That never happened, apparently, because the cops never came.
Above all, Bretton Woods is a lovely place to lunch, which is exactly what Mr. Hallock and I did on this porch. What a view!