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The catch-all phrase for the pact is Bretton Woods, named after the New Hampshire ski resort where the Americans first made the pitch shortly after the Normandy invasion. It is perhaps more commonly known as the free-trade era of the post–World War II period, or simply as globalization.
Even better, the Americans were perfectly willing to provide the World War II Allies with anything they needed—oil or fuel, steel or guns, wheat or flour—so long as they were paid in gold. By war’s end the U.S. economy wasn’t only far larger and that of Europe far smaller. The U.S. dollar wasn’t just the only reasonable medium of exchange in the entire Western Hemisphere: it had sucked the very metal out of Europe that would have enabled a long-term currency competitor anywhere in the Eastern Hemisphere. If anything, this is truer than it sounds. After all, the metals-backed currencies of
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The mortgage-backed securities quickly degraded from the safest of all investments to something even Enron would have balked at. New homeowners started defaulting on their mortgages before they had even made a single payment. It all went belly-up. We know the subsequent economic carnage as the 2007–09 financial crisis.
The slowly aging demography of the United States and the moderately aging demographies of Japan and the Europeans and the quickly aging demographies of the advanced developing world all converge on mass retirement in the 2020s and 2030s. And when they retire—when all of them retire at once—they will stop providing the capital that has fueled our world.