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Strained RelationsUS Foreign-Exchange Operations and Monetary Policy in the Twentieth Century$
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Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz

Print publication date: 2015

Print ISBN-13: 9780226051482

Published to Chicago Scholarship Online: September 2015

DOI: 10.7208/chicago/9780226051512.001.0001

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Introducing the Exchange Stabilization Fund, 1934–1961

Introducing the Exchange Stabilization Fund, 1934–1961

(p.56) 3 Introducing the Exchange Stabilization Fund, 1934–1961
Strained Relations

Michael D. Bordo

Owen F. Humpage

Anna J. Schwartz

University of Chicago Press

Congress created the Exchange Stabilization Fund, the first formal mechanism for foreign-exchange intervention in the United States, in 1934 following the dollar’s devaluation. In this chapter, we offer a detailed account of its establishment, its institutional structure, and its operations. The Exchange Stabilization Fund’s core mission was foreign-exchange intervention in both gold and foreign currencies to stabilize the dollar. We base much of our analysis on heretofore unavailable Morgenthau papers, on W. A. Brown’s unpublished manuscript, and on Bank of Englandarchival documents. We include a discussion of the British, French and American Tripartite Agreementon exchange-rate stabilization. We also discuss three other missions of the Exchange Stabilization Fund: extending loans to foreign countries, operations in connection with the Silver Purchase Act of 1934, and investments in US government securities.

Keywords:   1934 dollar devaluation, Exchange Stabilization Fund, Great Depression, Tripartite Agreement

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