My talk is meant to be dispassionate, well-grounded in economic thought, and certainly free from nationalistic overtones. But there can be no doubt about the fact that in 1920 everybody, even Keynes himself, admitted the desirability of an expeditious return to the gold standard.This evening I would like to illustrate my thesis through the following example: The Great Depression of the 1930's, in particular, the unprecedented world-wide unemployment was caused by the decision of the victorious Entente powers to return to the gold standard after World War I, BUT without allowing the clearing house of the gold standard, the international bill market, to make a comeback. Had there been no decision to ban it, bill trading would have started spontaneously.What this decision was meant to accomplish was to block multilateral world trade by brute force.

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Courtesy of Safe Harbor, must read speech delivered by Antal Fekete ealier today.

The Deep Cause Of The Great Financial Crisis: The Peace Diktat Of Versailles Speech delivered at the Munich Economic Talks, October 6, 2010 Ladies and Gentlemen, According to a recent news item, not widely circulated, after more than 90 years of slavery, on October 3, 2010, Germany made the final payment for its World War I debt. It gives me great pleasure to be one of the first to congratulate you, literally hours after the German people were finally freed from debt slavery.

Most, if not all, the great events in the history of mankind since the advent of money, have a causal explanation.

The causes are to be found in the use or abuse of money and credit -- provided that we penetrate historiography sufficiently deeply.

Why did the victorious Entente powers make such a foolish decision that was going to hurt their own producers and consumers, and hinder reconstruction?

They did it because they wanted to punish Germany over and above the provisions of the Versailles peace treaty.

They wanted to maintain the wartime blockade under a different name.

They wanted to monitor, and control if need be, the move of goods in and out of Germany.

In peacetime the only way to accomplish this was to replace multilateral with bilateral trade; to block the financing of world trade with short-term commercial bills, also known as real bills.

To put it differently, the Entente powers phased out self-liquidating credit and replaced it with artificial bank credit, the creation of which they could control through their central banks. By this I mean that imports were paid for by issuing, endorsing, and accepting bills of exchange payable in gold at maturity no more than 91 days after shipping the underlying merchandise. The exporter could use it to pay for imports by passing it on, after endorsing it, to the exporter in a third country.

With three good signatures: that of the exporter, that of the importer, and that of a recognized acceptor the bill of exchange went through a most remarkable metamorphosis. This exporter could likewise use it to pay for his own imports, and so on and so forth.