U.S. Intervention During the Bretton Wood Era: 1962-1973
Michael D. Bordo
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
Federal Reserve Bank of Cleveland
Anna J. Schwartz
City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office
April 11, 2011
FRB of Cleveland Policy Discussion Paper No. 11-08
By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the official price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In response, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to finance their own interventions. The Treasury also began intervening in the market. The operations often forestalled gold losses, but in so doing, delayed the need to solve Bretton Woods’ fundamental underlying problems. In addition, the institutional arrangements forged between the Federal Reserve and the U.S. Treasury raised important questions bearing on Federal Reserve independence.
Number of Pages in PDF File: 89
Keywords: intervention, Bretton Woods, swap lines, Triffin’s paradox, gold
JEL Classification: F3, N1, N2working papers series
Date posted: April 12, 2011
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