A Monetary History of the United States, 1867-1960

Writing in the June 1965 issue of theEconomic Journal, Harry G. Johnson begins with a sentence seemingly calibrated to the scale of the book he set himself to review: "The long-awaited monetary history of the United States by Friedman and Schwartz is in every sense of the term a monumental scholarly achievement--monumental in its sheer bulk, monumental in the definitiveness of its treatment of innumerable issues, large and small . . . monumental, above all, in the theoretical and statistical effort and ingenuity that have been brought to bear on the solution of complex and subtle economic issues."

Friedman and Schwartz marshaled massive historical data and sharp analytics to support the claim that monetary policy--steady control of the money supply--matters profoundly in the management of the nation's economy, especially in navigating serious economic fluctuations. In their influential chapter 7, The Great Contraction--which Princeton published in 1965 as a separate paperback--they address the central economic event of the century, the Depression. According to Hugh Rockoff, writing in January 1965: "If Great Depressions could be prevented through timely actions by the monetary authority (or by a monetary rule), as Friedman and Schwartz had contended, then the case for market economies was measurably stronger."

Milton Friedman won the Nobel Prize in Economics in 1976 for work related to A Monetary History as well as to his other Princeton University Press book, A Theory of the Consumption Function (1957).

"A monumental scholarly accomplishment. . . . [sets] a new standard for the writing of monetary history."--The Economic Journal

A monumental scholarly accomplishment. . . . [sets] a new standard for the writing of monetary history. The Economic Journal

andldquo;Bordo, Humpage, and Schwartz trace the development of US policies and institutions designed to maintain stability in foreign exchange markets during the past century. . . . Recommended.andrdquo;

andldquo;This book is clearly destined to become a classic, leaving a mark on future research on foreign-exchange operations.andrdquo;

Writing in the June 1965 issue of theEconomic Journal, Harry G. Johnson begins with a sentence seemingly calibrated to the scale of the book he set himself to review: "The long-awaited monetary history of the United States by Friedman and Schwartz is in every sense of the term a monumental scholarly achievement--monumental in its sheer bulk, monumental in the definitiveness of its treatment of innumerable issues, large and small . . . monumental, above all, in the theoretical and statistical effort and ingenuity that have been brought to bear on the solution of complex and subtle economic issues."

Friedman and Schwartz marshaled massive historical data and sharp analytics to support the claim that monetary policy--steady control of the money supply--matters profoundly in the management of the nation's economy, especially in navigating serious economic fluctuations. In their influential chapter 7, The Great Contraction--which Princeton published in 1965 as a separate paperback--they address the central economic event of the century, the Depression. According to Hugh Rockoff, writing in January 1965: "If Great Depressions could be prevented through timely actions by the monetary authority (or by a monetary rule), as Friedman and Schwartz had contended, then the case for market economies was measurably stronger."

Milton Friedman won the Nobel Prize in Economics in 2000 for work related to A Monetary History as well as to his other Princeton University Press book, A Theory of the Consumption Function (1957).

During the twentieth century, foreign-exchange intervention was sometimes used in an attempt to solve the fundamental trilemma of international finance, which holds that countries cannot simultaneously pursue independent monetary policies, stabilize their exchange rates, and benefit from free cross-border financial flows. Drawing on a trove of previously confidential data, Strained Relations reveals the evolution of US policy regarding currency market intervention, and its interaction with monetary policy. The authors consider how foreign-exchange intervention was affected by changing economic and institutional circumstancesand#151;most notably the abandonment of the international gold standardand#151;and how political and bureaucratic factors affected this aspect of public policy.

Michael D. Bordo is professor of economics at Rutgers, the State University of New Jersey, and a research associate of the NBER.Owen F. Humpage is a senior economic advisor in the Research Department of the Federal Reserve Bank of Cleveland.Anna J. Schwartz (1915-2012) was a research associate of the NBER.

Preface

1.and#160;and#160; On the Evolution of US Foreign-Exchange-Market Intervention: Thesis, Theory, and Institutions

2.and#160;and#160; Exchange Market Policy in the United States: Precedents and#160;and Antecedents

3.and#160;and#160; Introducing the Exchange Stabilization Fund, 1934and#8211;1961

4. and#160; US Intervention during the Bretton Woods Era, 1962and#8211;1973

5.and#160;and#160; US Intervention and the Early Dollar Float, 1973and#8211;1981

6.and#160;and#160; US Foreign-Exchange-Market Intervention during the Volcker-Greenspan Era, 1981and#8211;1997

7.and#160;and#160; Lessons from the Evolution of US Monetary and Intervention Policies

Epilogue: Foreign-Exchange-Market Operations in the Twenty-First Century

Appendix 1: Summaries of Bank of England Documents

Appendix 2: Empirical Method for Assessing Success Counts

Notes

References

Index