Towards a New International Monetary System

Towards a New International Monetary System

By Peter Koenig

Global Research, February 01, 2024

Theme: Global Economy

 

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Background and Introduction

This relatively lengthy introduction is deemed necessary to understand how we got to where we are today; to grasp the long-term western (US) plan to dominate the world economy with their currency, the US dollar, to which some 23 years ago the US-dollar’s cousin, the Euro, was added, with the same “zero-backing” base.

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The current western (US) made International Monetary System (IMS) has been plagued by unfairness since the beginning, when it was created through the so-called Federal Reserve Act (FRA), signed by US President Woodrow Wilson on December 23, 1913.

Image is from the public domain

The FRA supposedly provided the US Government with the means to control inflation, and most importantly, it brought about the internationalization of the US-dollar as a global currency. Meaning, the US dollar could be used internationally as a trading currency, which de facto, made it into an international reserve currency. As such, it was increasingly used by countries around the world as a major reserve currency, allowing, or “necessitating” Washington to increase their money supply.

In 1834, the United States fixed the price of gold at $20.67 per ounce, where it remained until 1933. Other major countries joined the gold standard in the 1870s. The period from 1880 to 1914 is known as the classical gold standard. During that time, most countries adhered (to varying degrees) to gold.

The law required the Federal Reserve to hold gold equal to 40 percent of the value of the currency it issued, i.e. the US dollar, and to convert those dollars into gold at a fixed price of $20.67 per ounce of pure gold.

The Federal Reserve Act of 1913 effectively created the Federal Reserve Bank called “The Fed”.

For purposes of (US) “financial stability” and adjustment to “varying international economic situations” the FRA also allowed The Fed to issue interest rates as guiding instruments for the US banking system, and de facto ever more for the international banking system, as The FED also internationalized the US dollar, especially for trade, so that gradually countries trading in US dollars were dollarized, to differing degrees. Trading in US dollars, no matter between what countries, became an unwritten rule.

This meant on average and over time, more than 90% of international reserves were held in gold and US dollars, thereby ever-more increasing their economies’ dependence on the US – or the US currency.

This also meant that the US could print dollars ever more indiscriminately – without backing – as the world depended ever-more on the US dollar for trade and national reserves.

When in July 1944 the Bretton Woods (BW) Conference not only created the International Monetary Fund (IMF) and the World Bank, but also a new Gold Standard, the US, organizer and effective “owner” of the BW Conference and its results, in a clever move, “convinced” the participating delegates of 44 nations to accept that the new Gold Standard – 1 troy ounce (about 31.1 grams) would be pegged to the US dollar.

Instead of fixing the value of gold according to the weighed average of the 5 or 6 key currencies emerging after WWII – applying the SDR principle – the gold rate was fixed at US$ 35 / per troy ounce (t-oz); the gold value used for backing the currencies of the BW-participating nations was expressed in US dollars.

This meant that de facto gold was replaceable by the US dollar.

The US also were and still are in full control of the IMF and the World Bank with a veto power. The US being the largest shareholder with a 16.5% share, effectively giving it veto power, since major decisions need 85% for approval.

This total control over the IMF and the World Bank is also the reason why China is vastly underrepresented in both the IMF and the World Bank. China is the second largest economy in absolute GDP terms, and the world’s largest economy in Purchasing Power Parity, or PPP-terms – see below.

The US administration needs congressional approval for any IMF quota reform. It took the government years to get Congress to put its stamp on the 2010 reform that increased China’s voting at the expense of European countries, but NOT at the expense of the US.

Similarly, only in October 2016, was the Chinese Yuan (RMB) accepted to join the IMF’s basket of Special Drawing Rights (SDR). In May 2022 was the currency weight in the SDR “adjusted” for the US-dollar to currently 43.38% from 41.73% and the yuan to 12.28% from 10.92%. The euro’s weighting declined to 29.31% from 30.93%, the yen’s fell to 7.59% from 8.33% and the British pound fell to 7.44% from 8.09%.

There is no doubt, comparing the Chinese economy with that of the US and Europe, that the Yuan is way undervalued. A more just valuation / weighing of the Yuan in the SDR currency basket (US$, Euro, Chinese Yuan, UK pound, Japanese yen) – is of high priority.

U.S. Abandons the Gold Standard

When in 1971 President Nixon abandoned the gold standard, via the US controlled IMF, meaning that the US would no longer adhere to backing her currency (US dollar) with gold, the price of gold skyrocketed and the US dollar took de facto over the role of gold.

This presented an unquestioned reason for the US to print indiscriminately US dollars, as the world needed them for their international trade and national reserve coffers.

The second blow came when in 1974, after the artificially created oil crisis of 1973-1974, the U.S. “negotiated” with Saudi Arabia, the head of OPEC (Organization of Petroleum Exporting Countries) that hydrocarbons, predominantly oil and gas, would only be traded in US dollars, thus, prompting Petrodollars flooding the world.

In exchange, the U.S. would provide Saudi Arabia with military protection and assist with weapons deals and infrastructure investment.

As of this day, oil continues to be the most valuable asset on the planet. More than 85% of all energy used to fuel the world’s economy originates from hydrocarbons.

The OPEC-dollar transaction deal allowed the US again to print indiscriminately more US dollars, as every country in the world needed US dollars to buy its (hydrocarbon) energy, thereby strengthening the US’s currency dominance over the world.

Today, about 60% of the world’s most used currencies (formerly called “convertible currencies”) are US dollars. While the world is flooded with the totally non-backed US dollar, the Chinese Yuan, the currency of the second largest or arguably the largest economy (in PPP-terms), accounts only for about 5%.

This disequilibrium must be corrected.

Indications for de-dollarization are increasing. In the early 1990s more than 90% of all monetary reserves were held in US dollar-denominated securities. Equally, about 90% of all international trade took place in US dollars. Today these proportions have been reduced to about 50% and 65%, respectively.

It is worth mentioning that many of the OPEC countries have fully or partially abandoned the unwritten rule of trading hydrocarbons in US dollars, replacing the dollar by local currencies, or by Yuan.

But much more is needed.

Back to President Wilson, the signatory of the Federal Reserve Act.

Shortly before his death in February 1924, President Wilson apparently came to regret signing the bill (Federal Reserve Act), saying: 

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.”

If indeed this is a true quote by President Woodrow Wilson, his foresight had repercussion up to this date – the world is ruled by a small elite and an unequal system, today still largely dominated by a single currency, the US dollar, which is backed by nothing, not gold, not commodities, not even by the United States’s own economy.

If GDP and debt are any indication for the value of a currency, consider this: Today’s US GDP in absolute terms is about US$ 27 trillion (followed by China US$ equivalent of 19.4 trillion), compared to a current US debt of 33.2 trillion – about 123% of GDP (China’s current debt of US-dollar equivalent 12.6 trillion – about a 65% debt-GDP ratio).

However, the real US debt, also called “unfunded liabilities” is currently about US$ 290 trillion (almost 11 times the current US GDP). Approximately 40% of unfunded liabilities consist of accrued interest on debt never intended to be paid, and another 20% of unmet medical liabilities, mostly related to war veterans’ injuries and psychic traumas; and about 12% relate to unfunded social security liabilities.

A little used economic indicator is Purchasing Power Parity (PPP). It equalizes the value of a basket of goods a currency can purchase, by eliminating the differences in price levels between countries. The GDP-PPP factor in the US is US$ 23.6 trillion, compared to China’s of US$-equivalent 33.5 trillion (2023 est.).

Converted into per capita, per year (pc/yr.) PPP: US = US$ 69,500; and China = US$ equivalent 24,000. Meaning – in China you may purchase for US$ 24,000 /pc/yr, what in the US would costs US$ 69,500 pc/yr.

In real economic terms GDP-PPP is more meaningful than the unadjusted GDP.

Towards a New International Monetary System

Any monetary reform must be seen and carried out considering the current international order – which is heavily marked by ever increasing conflicts between West and East.

Western powers are seeking to preserve their status, by rivaling the autonomous and sovereign development of independent nations, or nations that strive to become and stay independent from the western fangs.

To enhance their control over global events – and de facto, attempting to establish a “Global One World Government” — western powers have set up so-called “rules-based orders” attempting to erase established international and national laws. As a result, the International Court of Justice (ICJ) in the Hague has become inoperable, defunct.

China’s and Russia’s philosophy of life and cooperation with the world and particularly within Asia is promoting a space for stability and joint development.

The year 2023 has shown that Greater Eurasia and Asia have so far been resistant to the negative external influences that are having the most dramatic consequences in Europe and the Middle East.

In summary, Asia and Eurasia remain a space of cooperation, not competition. The leading regional powers are able to reach terms that are fair to their smaller partners.

The new geographically widely dispersed BRICS-11 (5+6) add a new dimension to international cooperation – and to a constructive detachment from the western (US) sanctions regime and US dollar-dominated world-dictate.

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A New or Revised International Monetary System: Might Consider.

General

• Assign a greater role of PPP – in economic valuation as well as in the weighted average of IMF’s SDRs;
• A massive reduction of US-dollars flooding the globe.

IMF / World Bank 

• Chinese Yuan to be revalued in the SDR, according to China’s economic strength
• Chinese contribution in both IMF and World Bank to be reassessed, according to the weighted average of member-countries’ economies
• Veto-power within these organizations to be reassessed; either abandoned altogether, i.e. one participant – one vote, or assigned according to newly assessed voting powers.

Asian Infrastructure and Investment Bank (AIIB)

• AIIB to become an ever-stronger player in international economic development, not as a competitor to the World Bank and IMF, but rather as a cooperator and leader or co-leader in specific sectors, where AIIB might have a comparative advantage.
• AIIB might take a lead in multi-currency (economic development) investments, promoting local currencies, under the premises that local currencies are enhancing a nation’s sovereignty and economic strength.

Virtual / Trading Currencies

With the objective of de-dollarization – i.e., brining an equilibrium of currencies in world circulation – and effective banning / blocking of (economic) sanctioning, which has proven detrimental to smaller and weaker economies:

• Promote trading in local currencies – SWAP agreements
• Abandoning SWIFT transfer system – replacing it with not one, but different transfer systems, not linked to the US-dollar;
• Developing SDR-type (weighted average of specific economic indicators) virtual trading currency or currencies;
  SDR-type – means an International Trading Currency (ITC) based on the principles applied to the IMF’s SDR;
• AIIB could be at the forefront of developing an ITC
• BRICS-plus could be an initial trial for a common SDR-type ITC;

Digital Currencies – including Central Bank Digital Currencies (CBDC)

• To be used specifically for international trading;
• If used for day-to-day people’s and commercial transactions, digital currencies, incl. CBDCs should not replace cash transactions, leaving people free to choose between cash and digital currencies 

Backing of Currencies 

• A country’s own economy should be determining a country’s monetary flow, considering international reserves and internal economic growth- and contraction fluctuations
• Instead of gold or other precious metals, currencies might be backed by a package or packages of, say 20 -25 internationally used commodities, of which approx. a third could be country-specific.
  Such commodity packages might also include gold and other precious metals, but foremost commonly used and essential food products and different types of raw materials, including hydrocarbons (notably petrol and gas) – and possibly other (maybe 10%-15%?), of less tangible social indicators; like public health; level of education; peaceful international cooperation; capacity of conflict resolution….

It is understood that these indicators, the commodity packages, and possibly social indicators, would have to be periodically reviewed and reassessed by an international body, designated by the Community of Nations.

The Community of Nations is not necessarily represented by the United Nations. The UN, as its stands and functions today, is no longer the UN established in October 1945 in San Francisco, to replace the League of Nations (set up after WWI), with the specific goal to help resolve international conflicts and to foster peace and harmony among nations, as today it is dominated by the US and a few US allies.

While a revision of the UN is necessary, it is beyond the task of designing a revised or new international monetary system.

Conclusion

The process of introducing a new system of “currency backing” might take time, and could start in Asia, under the lead of China and Russia, extending to the ASEAN and BRICS countries, and eventually and hopefully be adopted also in the west, meaning a successful revision and overhaul of the IMF and World Bank.

The AIIB and Shanghai Cooperation Organization (SCO), as well as China’s International Monetary Institute (IMI), might take a leading role in designing currency backing packages.

The above are a few ideas for consideration and discussion possibly during the seminar on a “New International Monetary System” on 23 January 2024 in Beijing.

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Peter Koenig is a geopolitical analyst and a former Senior Economist at the World Bank and the World Health Organization (WHO), where he worked for over 30 years around the world. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed; and co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020). 

Peter is a non-resident Senior Fellow of the Chongyang Institute of Renmin University, Beijing. He is also a Research Associate of the Centre for Research on Globalization (CRG).

The original source of this article is Global Research

Copyright © Peter Koenig, Global Research, 2024

Posted with the permission of the author.

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In Case You Haven't Noticed Continued

 In Case You Haven’t Noticed Continued

My Name It Is Nothing

Richard Nixon in 1945 was in Naval Intelligence, and came to know Allen Dulles.  He also knew of the machinations of Dulles with the enemies.  Then there was Representative Jerry Voorhis who was from Nixon’s district.  Voorhis wrote a book entitled “Beyond Victory”.  It was not accepted by the establishment, nor by their enforcers, aka the CIA.  Representative Voorhis proposed the nationalization of the private central bank which is the Federal Reserve. The Federal Reserve was, and still is unconstitutional.  The Federal Reserve is not a federal entity.  So the Eastern banking establishment wanted to replace Voorhis for he was a representative of people. Voorhis was not representing their own private.  Representative Voorhis also stepped on other toes with his moves against the unlimited power of the oil companies.  He stopped He stopped a sweetheart deal as the Navy was to grant Standard Oil exclusive drilling rights in the Elk Hill naval reserve in Central California.  He also posed a direct threat to the Dulles Brothers.  He was shining a light on the wartime collusion between Cromwell and Sullivan, and their clients with the Nazi cartels.  The Dulles brothers were both former employees of Cromwell and Sullivan.  To further infuriate the Shadow Government of the World he demanded a congressional investigation of The Bank of International Settlements, and its director, Thomas McKittrick.  McKittrick was a close associate of the Dulles brothers.  McKittrick was a Nazi collaborator. So you can see that it was not the Representative’s constituents that wanted to vote Voorhis out, no it was the Deep State.

The National Security Act of 1947 established the National Security Council and the Central Intelligence Agency.  This agency was exempted from limitations on the use of Federal Funds. Allen Dulles was involved with the covert activities of the CIA.

In 1948 New York Governor Thomas Dewey was expected to win.  Dewey was a gang busting attorney, and quite popular.  With the War over, unemployment, inflation, and Truman’s civil Rights initiative the Democratic Party was fractured.  Yet Truman won.   Two years later Richard Nixon is elected to the Senate.  He ran against a very popular Karen Gahagen Douglas.  All but one newspaper in California endorsed Nixon.  Who plays the media like a mighty Wurlitzer?

Post war Nixon was managing the legal aspects of Navy procurement contracts.  While doing this he came across papers that the Dulles brothers had initiated.  These papers were to initiate Operation Paperclip. Operation Paperclip was to facilitate the bringing Nazi to the US.  This was in direct violation of President Truman’s orders.  As the story goes Richard Nixon answered add in a local California newspaper that asked if you want to run for office.  The story was a bit more complicated.  An old associate of the Eastern banking establishment asked him to return to California and run for Representative Voorhis’s seat.  He agreed, and he ran a red baiting campaign.  He won, and landed in Congress in 1947.  He made a name for himself on the House Un-American Committee.  He had something on the Dulles brothers, and this he was to use effectively.  Nixon demanded a position on the Presidential ticket for the 1952 election, and he got it. 

President Eisenhower, though a little known fact that he was a war criminal, was nominated by the Republican Party for the Presidential position on the ticket.  Of course this little known fact was known by the Dulles brothers and the military industrial complex. Eisenhower named John Foster Dulles as his Secretary of State. Eisenhower did not have it easy as the military believed that with an ex general in office that they could have their way, so it was a constant battle.  You may recall that Eisenhower had to threaten those that ran Area 51 with a military invasion if he was not kept abreast of what was happening there.  Intelligence, if I may call it, was running Area 51.  Then Eisenhower was to meet with the Soviet Unions’ Nikita Khrushchev for negotiations.  Though all U2 reconnaissance flights were to be grounded on My 1^st  a U2 flown by Gary Powers was shot down over the Soviet Union.  In whose interests was it that the spy missions continued, and for what purpose.  It sure was not in the interests of the United States, its citizens, or for world peace.  Who gathers intelligence for the United States?

So here comes the 1960 Presidential Election and it is John F. Kennedy/Lyndon Johnson versus Richard Nixon/Henry Cabot Lodge Jr.  Nixon wanted Nelson Rockefeller as his running mate, but Rockefeller was not interested.  Nixon knew who buttered his bread.  Well JFK’s father Joe knew how the game was played, and he played it even better.  John F. Kennedy was elected President, but it would not be for long. 

Nixon while vice president had been working with Allan Dulles to overthrow Fidel Castro the leader of the Cuban Government.  They were planning the Bay of Pigs invasion.  Well JFK inherited it, and Allen Dulles informed him that the invasion would be a sure thing.  Well it was a total failure.  Kennedy then fired Dulles. President Kennedy said  that he was going to tear the CIA into a thousand pieces and throe it to the wind.

It might be do us well to go back to a speech given by President Kennedy on April 27, 1961 to the Press Club.  The speech was about the responsibilities of the Press, and the danger to the nation of the secret societies within it.  (A copy of the transcript is attached to this article.)  Some say that it was his signing his ow death warrant.  President Kennedy began to print Treasury Notes which were backed silver.  Those of the Federal Reserve were incensed.  He fired Allan Dulles.  He did not want Israel to obtain an atomic weapon.  The mob was enraged at his brother’s going after them.  The Cubans that wanted the overthrow of the Castro government were enraged.  The Deep State. The Oil Industry, the Military Industrial Complex all wanted an end to his Presidency.  Kennedy was going to remove all troops from Vietnam, which was another nail in his coffin.  The CIA was fully behind the assassination of the President.  George Herbert Walker Bush was there in Dallas on that day, November 22, 1963.  He could not remember where he was that day.  He as assisting in the assassination.  Then came the cover-up.  The patsy was Lee Harvey Oswald, and he was described as the “lone nut assassin”.  Of course this was not to be believed by many.  So as evidence to the contrary arose, especially when the “lone nut” is himself assassinated while in police custody the CIA comes up with a label.  They attack the messengers, and not their messages with “Conspiracy Theorist”.  How convenient is that?

So in comes Lyndon Banes Johnson to be the President, and he immediately rescinds Kennedy’s removal of the troops from Vietnam.  Instead he escalates the useless war to satisfy the military industrial complex.  Johnson runs for the 1964 Election and wins, but he did not accept another term.  No, Richard Nixon comes back to run for President.  His handpicked challenger was to be Hubert Humphrey, but Bobby Kennedy has other designs.  Bobby wins the California primaries, and is immediately assassinated by another “lone nut assassin”. 

To be continued

Appendix:

The President and the Press: Address before the American Newspaper Publishers Association, April 27, 1961

President John F. Kennedy
Waldorf-Astoria Hotel, New York City
April 27, 1961

Mr. Chairman, ladies and gentlemen:

I appreciate very much your generous invitation to be here tonight.

You bear heavy responsibilities these days and an article I read some time ago reminded me of how particularly heavily the burdens of present day events bear upon your profession.

You may remember that in 1851 the New York Herald Tribune under the sponsorship and publishing of Horace Greeley, employed as its London correspondent an obscure journalist by the name of Karl Marx.

We are told that foreign correspondent Marx, stone broke, and with a family ill and undernourished, constantly appealed to Greeley and managing editor Charles Dana for an increase in his munificent salary of $5 per installment, a salary which he and Engels ungratefully labeled as the "lousiest petty bourgeois cheating."

But when all his financial appeals were refused, Marx looked around for other means of livelihood and fame, eventually terminating his relationship with the Tribune and devoting his talents full time to the cause that would bequeath the world the seeds of Leninism, Stalinism, revolution and the cold war.

If only this capitalistic New York newspaper had treated him more kindly; if only Marx had remained a foreign correspondent, history might have been different. And I hope all publishers will bear this lesson in mind the next time they receive a poverty-stricken appeal for a small increase in the expense account from an obscure newspaper man.

I have selected as the title of my remarks tonight "The President and the Press." Some may suggest that this would be more naturally worded "The President Versus the Press." But those are not my sentiments tonight.

It is true, however, that when a well-known diplomat from another country demanded recently that our State Department repudiate certain newspaper attacks on his colleague it was unnecessary for us to reply that this Administration was not responsible for the press, for the press had already made it clear that it was not responsible for this Administration.

Nevertheless, my purpose here tonight is not to deliver the usual assault on the so-called one party press. On the contrary, in recent months I have rarely heard any complaints about political bias in the press except from a few Republicans. Nor is it my purpose tonight to discuss or defend the televising of Presidential press conferences. I think it is highly beneficial to have some 20,000,000 Americans regularly sit in on these conferences to observe, if I may say so, the incisive, the intelligent and the courteous qualities displayed by your Washington correspondents.

Nor, finally, are these remarks intended to examine the proper degree of privacy which the press should allow to any President and his family.

If in the last few months your White House reporters and photographers have been attending church services with regularity that has surely done them no harm.

On the other hand, I realize that your staff and wire service photographers may be complaining that they do not enjoy the same green privileges at the local golf courses that they once did.

It is true that my predecessor did not object as I do to pictures of one's golfing skill in action. But neither on the other hand did he ever bean a Secret Service man.

My topic tonight is a more sober one of concern to publishers as well as editors.

I want to talk about our common responsibilities in the face of a common danger. The events of recent weeks may have helped to illuminate that challenge for some; but the dimensions of its threat have loomed large on the horizon for many years. Whatever our hopes may be for the future--for reducing this threat or living with it--there is no escaping either the gravity or the totality of its challenge to our survival and to our security--a challenge that confronts us in unaccustomed ways in every sphere of human activity.

This deadly challenge imposes upon our society two requirements of direct concern both to the press and to the President--two requirements that may seem almost contradictory in tone, but which must be reconciled and fulfilled if we are to meet this national peril. I refer, first, to the need for a far greater public information; and, second, to the need for far greater official secrecy.

I

The very word "secrecy" is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths and to secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers which are cited to justify it. Even today, there is little value in opposing the threat of a closed society by imitating its arbitrary restrictions. Even today, there is little value in insuring the survival of our nation if our traditions do not survive with it. And there is very grave danger that an announced need for increased security will be seized upon by those anxious to expand its meaning to the very limits of official censorship and concealment. That I do not intend to permit to the extent that it is in my control. And no official of my Administration, whether his rank is high or low, civilian or military, should interpret my words here tonight as an excuse to censor the news, to stifle dissent, to cover up our mistakes or to withhold from the press and the public the facts they deserve to know.

But I do ask every publisher, every editor, and every newsman in the nation to reexamine his own standards, and to recognize the nature of our country's peril. In time of war, the government and the press have customarily joined in an effort based largely on self-discipline, to prevent unauthorized disclosures to the enemy. In time of "clear and present danger," the courts have held that even the privileged rights of the First Amendment must yield to the public's need for national security.

Today no war has been declared--and however fierce the struggle may be, it may never be declared in the traditional fashion. Our way of life is under attack. Those who make themselves our enemy are advancing around the globe. The survival of our friends is in danger. And yet no war has been declared, no borders have been crossed by marching troops, no missiles have been fired.

If the press is awaiting a declaration of war before it imposes the self-discipline of combat conditions, then I can only say that no war ever posed a greater threat to our security. If you are awaiting a finding of "clear and present danger," then I can only say that the danger has never been more clear and its presence has never been more imminent.

It requires a change in outlook, a change in tactics, a change in missions--by the government, by the people, by every businessman or labor leader, and by every newspaper. For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence--on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day. It is a system which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations.

Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. It conducts the Cold War, in short, with a war-time discipline no democracy would ever hope or wish to match.

Nevertheless, every democracy recognizes the necessary restraints of national security--and the question remains whether those restraints need to be more strictly observed if we are to oppose this kind of attack as well as outright invasion.

For the facts of the matter are that this nation's foes have openly boasted of acquiring through our newspapers information they would otherwise hire agents to acquire through theft, bribery or espionage; that details of this nation's covert preparations to counter the enemy's covert operations have been available to every newspaper reader, friend and foe alike; that the size, the strength, the location and the nature of our forces and weapons, and our plans and strategy for their use, have all been pinpointed in the press and other news media to a degree sufficient to satisfy any foreign power; and that, in at least in one case, the publication of details concerning a secret mechanism whereby satellites were followed required its alteration at the expense of considerable time and money.

The newspapers which printed these stories were loyal, patriotic, responsible and well-meaning. Had we been engaged in open warfare, they undoubtedly would not have published such items. But in the absence of open warfare, they recognized only the tests of journalism and not the tests of national security. And my question tonight is whether additional tests should not now be adopted.

The question is for you alone to answer. No public official should answer it for you. No governmental plan should impose its restraints against your will. But I would be failing in my duty to the nation, in considering all of the responsibilities that we now bear and all of the means at hand to meet those responsibilities, if I did not commend this problem to your attention, and urge its thoughtful consideration.

On many earlier occasions, I have said--and your newspapers have constantly said--that these are times that appeal to every citizen's sense of sacrifice and self-discipline. They call out to every citizen to weigh his rights and comforts against his obligations to the common good. I cannot now believe that those citizens who serve in the newspaper business consider themselves exempt from that appeal.

I have no intention of establishing a new Office of War Information to govern the flow of news. I am not suggesting any new forms of censorship or any new types of security classifications. I have no easy answer to the dilemma that I have posed, and would not seek to impose it if I had one. But I am asking the members of the newspaper profession and the industry in this country to reexamine their own responsibilities, to consider the degree and the nature of the present danger, and to heed the duty of self-restraint which that danger imposes upon us all.

Every newspaper now asks itself, with respect to every story: "Is it news?" All I suggest is that you add the question: "Is it in the interest of the national security?" And I hope that every group in America--unions and businessmen and public officials at every level-- will ask the same question of their endeavors, and subject their actions to the same exacting tests.

And should the press of America consider and recommend the voluntary assumption of specific new steps or machinery, I can assure you that we will cooperate whole-heartedly with those recommendations.

Perhaps there will be no recommendations. Perhaps there is no answer to the dilemma faced by a free and open society in a cold and secret war. In times of peace, any discussion of this subject, and any action that results, are both painful and without precedent. But this is a time of peace and peril which knows no precedent in history.

II

It is the unprecedented nature of this challenge that also gives rise to your second obligation--an obligation which I share. And that is our obligation to inform and alert the American people--to make certain that they possess all the facts that they need, and understand them as well--the perils, the prospects, the purposes of our program and the choices that we face.

No President should fear public scrutiny of his program. For from that scrutiny comes understanding; and from that understanding comes support or opposition. And both are necessary. I am not asking your newspapers to support the Administration, but I am asking your help in the tremendous task of informing and alerting the American people. For I have complete confidence in the response and dedication of our citizens whenever they are fully informed.

I not only could not stifle controversy among your readers--I welcome it. This Administration intends to be candid about its errors; for as a wise man once said: "An error does not become a mistake until you refuse to correct it." We intend to accept full responsibility for our errors; and we expect you to point them out when we miss them.

Without debate, without criticism, no Administration and no country can succeed--and no republic can survive. That is why the Athenian lawmaker Solon decreed it a crime for any citizen to shrink from controversy. And that is why our press was protected by the First Amendment-- the only business in America specifically protected by the Constitution- -not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply "give the public what it wants"--but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate and sometimes even anger public opinion.

This means greater coverage and analysis of international news--for it is no longer far away and foreign but close at hand and local. It means greater attention to improved understanding of the news as well as improved transmission. And it means, finally, that government at all levels, must meet its obligation to provide you with the fullest possible information outside the narrowest limits of national security--and we intend to do it.

III

It was early in the Seventeenth Century that Francis Bacon remarked on three recent inventions already transforming the world: the compass, gunpowder and the printing press. Now the links between the nations first forged by the compass have made us all citizens of the world, the hopes and threats of one becoming the hopes and threats of us all. In that one world's efforts to live together, the evolution of gunpowder to its ultimate limit has warned mankind of the terrible consequences of failure.

And so it is to the printing press--to the recorder of man's deeds, the keeper of his conscience, the courier of his news--that we look for strength and assistance, confident that with your help man will be what he was born to be: free and independent.

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