Last year the CFS published a book by me and Gabrielle Canning called Just Before Bretton Woods: The Atlantic City Conference, June 1944. The book is the only detailed treatment of the small, secretive conference held immediately preceding Bretton Woods to hammer out the draft agreements for the International Monetary Fund and the World Bank. The Bretton Woods conference worked from the drafts to produce the final agreements establishing the two organizations. As at Bretton Woods, the leading figures at Atlantic City were John Maynard Keynes of the British delegation and Harry Dexter White of the American delegation.
We have now finally organized the background material we gathered for the book. We photographed thousands of pages of documents in the U.S. National Archives and the UK National Archives. They include not only conference material published in the book, but correspondence within and between the U.S. and British governments, which provide a detailed picture of how matters unfolded in the lead-up to the conference. We have also provided a detailed guide to the files. Our efforts should help any future researchers who want to cover some of the same ground to get a flying start, saving many hours of searching for materials.
The CFS is delighted to present an interview with the eminent international economist John Williamson, reviewing his more than five decades of work in the field.
Williamson is best known for coining the term “Washington Consensus” in 1989 as a summary of the policy reforms and structural adjustment measures that the International Monetary Fund, World Bank, and U.S. Treasury advocated for emerging market economies. The term quickly gained resonance and continues to be widely used today, both as the description Williamson initially presented it as and as a prescription of what good policies should be (see the appendix to the interview).
He also worked for much of his career on “intermediate” exchange rates between the extremes of fixed and floating. The late Rüdiger Dornbusch of MIT summarized Williamson’s proposals as “BBC” – band, basket and crawl. In support of them, Williamson devised the influential concept of the “fundamental equilibrium exchange rate” (FEER).
In 2012 Williamson retired from the Peterson Institute of International Economics, where he had been a senior fellow for more than 20 years. His previous appointments included professorships in his native England, the United States, and Brazil; an advisory post at the British Treasury; and staff or management positions at the International Monetary Fund, World Bank, and United Nations.
Besides covering the major ideas of Williamson’s career as an economist, the interview offers a few glimpses into other areas of his life and reminds us of how much economic conditions have changed. He was born at home, common in his generation but now rare in rich countries. Despite being the son of a successful English businessman, he went abroad only once before adulthood, on a one-week school trip to Paris. The UK had extensive exchange controls back then, and allowances for tourism were notoriously stingy. He served his compulsory national service, another now-bygone institution, working on a nuclear attack scenario for the Royal Air Force that has a bit of a darkly comic Dr. Strangelove feel.
I interviewed Williamson with CFS research associate Robert Yee. John’s daughter Theresa gave us considerable help, for which we are grateful.
The Bretton Woods conference, which established the International Monetary Fund and the World Bank, was held from July 1-22, 1944 and remains widely known today, 75 years later. Far less known is the smaller conference that immediately preceded it in Atlantic City, New Jersey, from June 15-30, 1944. Only 17 countries attended, as opposed to 44 at Bretton Woods, and the conference was closed to the press, whereas at Bretton Woods dozens of journalists were present. Not much has ever been written about the Atlantic City conference, in contrast to a number of books and hundreds of articles that have examined Bretton Woods and its legacy.
To commemorate the 70th anniversary of Bretton Woods, in 2014 the Center for Financial Stability held a conference in the same location, the Mount Washington Hotel in Bretton Woods, New Hampshire. The conference featured papers that can be found elsewhere on the CFS Web site and the presentation of The Bretton Woods Transcripts, a book of previously unpublished conference material that I edited with Andrew Rosenberg and that the CFS published.
For the 75th anniversary, the CFS later this year will issue a book edited by me and Gabrielle Canning, a young scholar who, conveniently, is my neighbor. The book, Just before Bretton Woods: The Atlantic City Financial Conference, June 1944, collects American and British archival documents that present a detailed picture of what happened at Atlantic City. The Atlantic City conference developed the draft agreements for the IMF and the World Bank from which the Bretton Woods conference proceeded. It is accurate to say that Atlantic City made the World Bank possible. Whereas there was already an internationally agreed statement on the principles to govern the IMF before Atlantic City, no similar statement existed for the World Bank. At Atlantic City, the two leading delegations, from the United States and Britain, found that their ideas about the Bank were close enough to assemble quickly a draft that was also broadly agreeable to the other countries present.
The Bank of the United States was the closest the United States came to having a central bank before establishing the Federal Reserve System. What was later called the First Bank of the United States operated from 1791 until its charter lapsed in 1811. The bank established a nationwide network of branches to help the federal government, its largest customer, transfer funds across the country. It was the only U.S. bank with a nationwide branch network until the 1990s. After bad experience without a national bank during the War of 1812, the federal government chartered what was termed the Second Bank of the United States in 1816. When its charter lapsed in 1836, the bank continued as the United States Bank of Pennsylvania, which failed in 1841 following recessions and financial panics. In all of its incarnations, its headquarters was in Philadelphia and it was the largest bank in the United States.
With three former students of CFS Special Counselor Steve Hanke, I have gathered the balance sheets of the Bank of the United States into a working paper and accompanying spreadsheet file that should be useful for anyone interested in the quantitative study of the financial system during the early years of the Republic. Adil Javat gathered data for the First Bank of the United States, George Gulino gathered data for the Second Bank, and Zackary Baker gathered data for the U.S. Bank of Pennsylvania. Javat and Baker previously published their data and analysis in working papers for Hanke’s Institute for Applied Economics, Global Health, and the Study of Business Enterprise. I filled in a number of holes that remained in their data. The joint working paper is a data paper only, with no analysis. (Here is the link to the whole working paper series: Javat’s paper is no. 74, Baker’s paper is no. 101, and the joint paper is no. 132. Gulino’s paper is unpublished.)
I see two lines of follow-on research that could be worthwhile for somebody else to do, since we lack the time and interest for them. One is to examine the relationships among the far-flung branches of the Second Bank and the U.S. Bank of Pennsylvania for clues about differences in regional financial development. Our paper digitizes the overall balance sheet for the Second Bank and the U.S. Bank of Pennsylvania, but the financial statements also show many important balance sheet items for individual branches, which we did not digitize. (Javat did digitize the branch data from the First Bank, which were far less extensive hence not unreasonably time-consuming for a student term paper.)
The second line of research concerns the liquidation of the U.S. Bank of Pennsylvania after it failed in 1841. The bankruptcy was possibly the largest ever in relation to the size of the U.S. economy. It lasted 15 years, at the end of which creditors were paid in full, though shareholders received nothing. There does not seem to be even any cursory scholarly summary of the bankruptcy proceedings. If adequate records exist, it could be a fascinating case study from the legal, economic, and possibly political angles alike. Nicholas Biddle, the sometime president of the Bank of the United States, destroyed many of its internal documents, but perhaps a trawl through court archives and newspapers will uncover records from which to write an informative account.
With several current or former undergraduate students of CFS Special Counselor Steve Hanke, I have converted the Fed’s weekly balance sheet from its beginning into spreadsheet form. The data should prove useful for anyone concerned with the quantitative study of monetary policy in the United States over the last 100+ years. Our working paper, “The Federal Reserve System’s Weekly Balance Sheet since 1914,” is available here.
The working paper is based on three earlier papers that I have previously written about; all are available at the link above:
“Insights from the Federal Reserve’s Weekly Balance Sheet, 1914-1941” by Justin Chen and Andrew Gibson,” January 2017 (post)
“Insights from the Federal Reserve’s Weekly Balance Sheet, 1942-1975” by Cecilia Bao and Emma Paine, May 2018 (post)
“Insights from the Federal Reserve’s Weekly Balance Sheet, 1976-2017” by Nicholas Fries, July 2018 (post)
Students of CFS Special Counselor Steve Hanke have previously written two papers digitizing the weekly balance sheet of the Federal Reserve System from 1914-1941 and 1942-1975 and analyzing developments in the Fed’s balance sheet. I wrote about them in previous posts. Now a third paper completes the data and the analysis by bringing the story up to the present. The author is Nicholas Fries and the paper is called “Insights from the Federal Reserve’s Weekly Balance Sheet, 1976-2017.”
The most recent paper is no. 114 (currently the latest paper) in this working paper series that Hanke edits. The earlier papers were nos. 70 and 104 in the series. The data files can be viewed from links under the paper.
The Fed has made digitized weekly data of its weekly balance sheet available since 1996, but not earlier, and from 1996-2002 the data were only previously available as individual files on the Fed’s Web site, not in a spreadsheet. From 2002 downloadable spreadsheet data are available. Besides appreciating the service Fries has done making the data available, readers will appreciate his balance sheet analysis, which is simple and to the point.
One more paper is left in the series on the Fed’s balance sheet. I will post about it within the next month.
Two students of CFS Special Counselor Steve Hanke have digitized the Federal Reserve System’s weekly balance sheet from 1942 to 1975, accompanying the data with some basic analysis of how assets and liabilities changed over the period. Particularly noteworthy is the behavior of the Fed’s gold reserves, since the period includes the establishment, operation, and end of the Bretton Woods version of the international gold standard.
Two of Hanke’s previous students digitized the balance sheet from its start in 1914 to 1941. The recent digitization, by Cecilia Bao and Emma Paine, is part of their working paper, “Insights from the Federal Reserve’s Weekly Balance Sheet, 1941-1975,” no. 104 in the Studies in Applied Economics series that Hanke edits. The earlier paper, which I blogged about in a previous post, is no. 73 in the series. Both papers and their accompanying spreadsheet workbooks can be accessed from this page. A third paper to be released later this summer will bring the data and analysis up to the present. I read and commented on drafts of all three papers.
A new e-book, Sovereign GDP-Linked Bonds: Rationale and Design, will be of interest to a number of readers of this blog. Contributors include Maurice Obstfeld (chief economist of the IMF), Patrick Honohan (governor of the Central Bank of Ireland during Ireland’s debt crisis), and David Beers (adviser at the Bank of England). The book is available for free by registering at the site of the publisher, VoxEU. (Hat tip: David Beers.)
Balance sheet data on two episodes of U.S. central banking are now available in spreadsheet form for the first time. Adil Javat has written a paper that digitizes data on the First Bank of the United States. The bank, established in 1791, was federally chartered and partly owned by the federal government. It was the only bank to have a nationwide branch network because states did not allow banks they chartered to branch across state lines, or in many cases even within them. The bank’s unusual attributes made in in effect a quasi central bank. The Democratic Party objected to it for that reason, and denied the bank an extension when its federal charter expired in 1811. The following year the United States became embroiled in the War of 1812 and missed the services that the Bank of the United States had provided. The U.S. Congress chartered a second Bank of the United States that began operations in 1817. It in turn was denied an extension of its charter by the Democratic Party in 1836. A fire at the U.S. Department of the Treasury in 1833 destroyed many records of the First Bank of the United States, so what remains is fragmentary, and is the fruit of searches of various archives by the 20th century historian James Wettereau. Perhaps more records are still out there, gathering dust somewhere?
Justin Chen and Andrew Gibson have written a paper that digitizes the weekly balance sheet of the Federal Reserve System (now called the H.4.1 release) from the Fed’s opening in 1914 to 1941. Their data will be of interest to anyone interested in the Fed’s behavior during the tumultuous period that included World War I, the sharp but short postwar depression of 1920-21, and the Great Depression. Previously — and surprisingly, given how much has been written about the early years of the Fed — digitized data were only available at monthly frequency. Weekly data should offer finer insights into the Fed’s behavior during episodes in which events were moving fast.
Javat, Chen, and Gibson are all students of CFS Senior Counselor Steve Hanke, and wrote their papers in a research course Hanke teaches for undergraduates at Johns Hopkins University. I read and commented on drafts of the papers.
(For the spreadsheets, see this page. There is a link underneath each paper to its accompanying workbook.)
A recent paper, “Making a reality of GDP-linked sovereign bonds,” contends that this is an opportune time to consider how to establish a broad market for such bonds. The paper, by staff of the Bank of England with contributions from the Banco Central de la República Argentina and the Bank of Canada, proposes four next steps: (1) build on existing work on a draft term sheet; (2) develop guidelines for when GDP-linked bonds are most beneficial to a sovereign issuer outside of a restructuring; (3) assemble principles for using GDP-linked debt in debt restructurings; and (4) improve understanding about pricing of GDP-linked bonds.
(Thanks to David Beers of the Bank of England for notification about the paper. I express no personal position on the subject here.)