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Chapter 5
The Big Cycles of the United States and the Dollar, Part 2
Published 07/22/20
The New World Order from 1945 until Now
As is typical after wars, World War II’s winning powers—most importantly the US, Britain, and the Soviet
Union (then called “the Big Three”)—led meetings to create the new world order, which included carving up
the world into geographic areas of control and establishing new money and credit systems. While France,
China, and a couple of other countries were technically aligned with these winning countries, they were lesser
players. And with Germany, Japan, and Italy defeated and broken by the war, they were neither leading nor
independent powers; they were subordinate to and aligned with the US. Britain, which was essentially bankrupt,
was also aligned with the US. The Soviet Union was the leading rival power that was not aligned with the US, so it
formed its own camp with its own allies. While there was relatively good cooperation between the two camps
immediately after the war, it didn’t take long for the world to become divided between the US-led
capitalist/democratic camp and the Soviet-controlled communist/autocratic camp, each with its own
monetary/economic systems, though there were a small number of less significant countries that were non-
aligned.
The chart below shows the aggregate power indices for the US, UK, Russia, and China since the end of the war,
which conveys this big picture.
We will now delve into this story more closely.
The Post-War Geopolitical and Military System
The three major powers and others got together in different conferences—the Yalta Conference, the Potsdam
Conference, and the Bretton Woods Conference were the most notable—and carved up the world with US-
controlled capitalist/democratic countries on one side and Soviet-controlled communist/autocratic countries on the
other, with each bloc having its own monetary systems. Germany was split into pieces, with the United States,
Great Britain, and France having control of West Germany and Russia controlling East Germany. Japan was under
US control, and China returned to a state of civil war between communists and the capitalists (i.e., the
Nationalists). Unlike after World War I when the United States chose to be relatively isolationist, after World War
II the United States took the primary leadership role in the world as it had most of the economic, geopolitical, and
military power.
Geographically the US-led Western world extended east from the US through Western Europe into Germany,
which was split into West Germany (which was controlled by the US and its allies) and East Germany along a line
of division that became known as the Iron Curtain. East of that line, going through Eastern Europe and the Soviet
Union to Korea was Soviet-controlled. Korea, like Germany, was split with the Soviets controlling the north and
the Americans controlling the south. China, which was essentially left weak and in civil war, got back Shanghai