Milton Friedman:
“In position, power, and function, the Federal Reserve System differs materially from all other central banks. When the U.S. dollar emerged as the primary international currency serving trade and commerce the world over, the Federal Reserve emerged as the central bank of the world. It already had acquired a leading position under the Bretton Woods system that had made the U.S. dollar the international reserve money, payable in gold at a price of $35 per ounce. When, in August 1971, President Nixon repudiated the Bretton Woods agreement, the world continued to use the U.S. dollar without its redeemability. After all, the world’s merchants and bankers had grown accustomed to it. The dollar afforded access to the markets of the most productive country in the world, and its record of relative stability was one of the best in recent monetary history, despite its devaluations in 1934 and 1971. Above all, the official repudiation of gold created a void which no other fiat currency could possibly fill. It left the Federal Reserve dollar in the most prominent position for becoming the world medium of exchange and reserve asset.”
Money and Freedom, 1985, p. 18.
How did the end of Bretton Woods cause the Federal Reserve to become more globally relevant?
How is the dollar weaker because the U.S. is less productive today relative to other regions of the world?
“In position, power, and function, the Federal Reserve System differs materially from all other central banks. When the U.S. dollar emerged as the primary international currency serving trade and commerce the world over, the Federal Reserve emerged as the central bank of the world. It already had acquired a leading position under the Bretton Woods system that had made the U.S. dollar the international reserve money, payable in gold at a price of $35 per ounce. When, in August 1971, President Nixon repudiated the Bretton Woods agreement, the world continued to use the U.S. dollar without its redeemability. After all, the world’s merchants and bankers had grown accustomed to it. The dollar afforded access to the markets of the most productive country in the world, and its record of relative stability was one of the best in recent monetary history, despite its devaluations in 1934 and 1971. Above all, the official repudiation of gold created a void which no other fiat currency could possibly fill. It left the Federal Reserve dollar in the most prominent position for becoming the world medium of exchange and reserve asset.”
Money and Freedom, 1985, p. 18.
How did the end of Bretton Woods cause the Federal Reserve to become more globally relevant?
How is the dollar weaker because the U.S. is less productive today relative to other regions of the world?
posted by Chris at 10:09 AM
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