About Kurt Schuler

Kurt Schuler, co-editor of The Bretton Woods Transcripts, is Senior Fellow of Financial History at the Center for Financial Stability and an economist in the Office of International Affairs at the United States Department of the Treasury.

The Experience of Free Banking

Much of what economists tell each other and the public about the nature and necessity of central banking lacks historical grounding. The Experience of Free Banking, just issued in a free, enlarged second edition by the Institute of Economic Affairs in London, discusses the extensive historical experience of monetary systems with competitive provision of currency. Such systems spanned more than 60 countries and hundreds of years up until the mid 20th century. Most were stable and showed no inherent tendency toward or need for establishing a central bank.

The first edition of the book was issued in 1992 by an academic publisher, and was priced accordingly. This expanded edition, in which I have three chapters, will be available in hard copy for those who prefer physical books, and is free in PDF here.

No free banking systems exist today, but the experience of free banking is relevant to today’s debates about privately provided cryptocurrencies, central bank digital currencies, and financial regulation. It presents a challenge both to economic theory and to the way economists and historians have continued to write financial history. They have generally ignored rather than addressed the ideas and facts that research in free banking has raised over the last generation. A notable exception is CFS Advisory Board member Charles Goodhart, whose 1988 book The Evolution of Central Banks remains the most serious and comprehensive answer on the pro-central banking side.

Readers who find want to know more about free banking can start with the bibliography by Elizabeth Qiao, here. The introduction contains a short list of suggested readings. At the time she compiled the bibliography, Qiao was a student of CFS Special Counselor Steve Hanke.

A Monetary History of China, free online

I recently found out that the English translation of Peng Xinwei’s monumental work A Monetary History of China is now available free online. The work covers Chinese monetary history from ancient times through the end of the monarchy in 1911. Peng Xinwei was a scholar turned banker who was one of the victims of Mao Zedong’s Cultural Revolution. The Chinese version of the book is from 1965. Edward Kaplan translated the book into English, an impressive feat of scholarship in its own right, and had it published in two volumes in 1994. I wrote a review of the book here.

There have of course been other notable books on Chinese monetary history since. Those that have caught my attention include Richard von Glahn’s Fountain of Fortune: Money and Monetary Policy in China, 1000-1700 and Jin Xu’s recently translated Empire of Silver: A New Monetary History of China. I have not seen a good history of the last century-plus of the Chinese monetary system, though there are books on subperiods and topics. For mainland Chinese scholars, the topic is fraught with difficulty, because under the first few decades of Communist rule, the monetary system was among the institutions that hindered China from experiencing the rapid and widespread economic growth enjoyed by Hong Kong, Singapore, and Taiwan.

FRED Publishes 100+ Years of CFS/Johns Hopkins Data on the Fed’s Balance Sheet

The Federal Reserve Bank of St. Louis FRED database, the premier source for free U.S. financial data, now includes data of the Federal Reserve System’s weekly balance sheet back to the Fed’s beginning in 1914. The data come from a paper and data set I compiled with five students of CFS Special Counselor Steve Hanke.

The students — Cecilia Bao, Andrew Chen, Nicholas Fries, Justin Gibson, and Emma Paine — were undergraduates who have all since graduated from Johns Hopkins University. As part of their work for Hanke’s course Research in Applied Economics, they wrote papers dividing the Fed’s history into three periods, with each paper using the corresponding data. I served as an adviser and outside reader. We then combined the data into one big data set.

Previously, some monthly balance sheet data from the Fed’s early years were digitized, along with full data from recent years. Full weekly data from the beginning, integrated with recent data, were however unavailable in any readily usable form. The students put in many hours digitizing the data, a task that any of thousands of professional economists could have done over the last 30 or even 50 years but none were enterprising enough to do.

Here is the announcement from FRED about the data set and here are the data series. For the original papers, see Chen and Gibson, Bao and Paine, Fries, and our joint paper. For the data from the joint paper, see here.

Just Before Bretton Woods: book and archival documents

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.

CFS Interviews John Williamson on the Washington Consensus, Exchange Rates, and More

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 75th anniversary of Bretton Woods … and Atlantic City

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.

Balance Sheets of the Bank of the United States

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.

Fed Weekly Balance Sheet since 1914 Now Available

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)

The Fed’s Weekly Balance Sheet since 1976

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.

The Fed’s Balance Sheet, 1942-1975

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.