Bretton Woods Agreements by Naomi Lamoreaux;Ian Shapiro;

Author:Naomi Lamoreaux;Ian Shapiro;
Language: eng
Format: epub
Publisher: Yale University Press
Published: 2019-11-14T16:00:00+00:00

Figure 10.2: Federal Reserve swap lines, 1962–1973. Source: Federal Reserve System.

Figure 10.3: Composition of drawings on the Federal Reserve swap line 1962–1971. Source: Federal Reserve System.

Several plans were also suggested to alleviate the confidence problem. These included substituting SDRs for gold and dollars as reserve assets, “the substitution account.”31 Many felt that this would just put the pressure onto the new asset, doubling the official price of gold.32 It would create sufficient liquidity to alleviate both the liquidity and adjustment problems. Also, the rise in the official price of gold would encourage gold production and discourage private demand. Growth in the world monetary gold stock would be sufficient to finance the growth of real output and prevent a threat to US gold reserves for the foreseeable future. Doubling the price of gold was opposed on the grounds that it was time inconsistent, that if the official price of gold were raised once, why would it not happen again? Market agents would expect a change in gold’s price in the future and would reduce their holdings of dollars permanently. Second, it would only postpone the problem because eventually, in the face of rapid real growth, scarcity would reappear.33

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