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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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US Intervention during the Bretton Woods Era, 1962–1973

US Intervention during the Bretton Woods Era, 1962–1973

(p.120) 4 US Intervention during the Bretton Woods Era, 1962–1973
Strained Relations

Michael D. Bordo

Owen F. Humpage

Anna J. Schwartz

University of Chicago Press

In the early 1960s, as Bretton Woods became fully functional, outstanding foreign dollar claims began to exceed the US gold stock, implying that the United States could not convert all dollar claims into gold at the official price. This situation created strong incentives to exchange dollar reserves for US gold. To forestall conversionsand maintain confidence in the Bretton Woods parities, the Federal Reserve first developed swap operations to provide temporary cover for foreign central banks’ dollar positions. This chapter focuses on the establishment, the mechanics, and the uses of swaps. We detail the controversial origins of the Federal Reserve’s foreign-exchange operations and explain theFederal Reserve’s relationship with the US Treasury in these actions.

Keywords:   Bretton Woods, gold, Hackley memorandum, swaps, Roosa bonds, Triffin’s paradox

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