Author Archives: Kurt Schuler

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.

CFS Reissues Leland B. Yeager’s International Monetary Relations

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The Center for Financial Stability is pleased to reissue Leland B. Yeager’s masterly International Monetary Relations: Theory, History, and Policy. First published in 1966, it appeared in a second edition in 1976, which has long been out of print. We are making the second edition available in an inexpensive electronic version on Amazon Kindle, as well as posting a facsimile scan of the print version. Here is the CFS home page for the book.

Leland B. Yeager (1924-2018) was a prominent economist of the 20th century. He spent most of his career at the University of Virginia and Auburn University. His main contributions in economics were in money, trade, and capital theory. He had wide-ranging interests that also included ethics and artificial languages, which he wrote about. Armaan Bahl, a student of CFS Special Counselor Steve Hanke, compiled an annotated bibliography of Yeager’s writings earlier this year.

International Monetary Relations was the book Yeager was best known for during his life. It was immediately recognized as being authoritative, innovative, and clearly written, qualities that occur together less often than they should in economics. The book remains worth reading today for its deft weaving of the strands of theory, history, and policy.

At his death, Yeager was working on a second magnum opus. He entrusted it to Steve Hanke for completion, and it was recently published as Capital, Interest, and Waiting: Controversies, Puzzles, and New Additions to Capital Theory.

The Bretton Woods Transcripts and Just Before Bretton Woods now free

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Two books published by the Center for Financial Stability, The Bretton Woods Transcripts and Just Before Bretton Woods, are now available free in PDF versions on the CFS Web site.

The Bretton Woods Transcripts contains the previously unpublished verbatim transcripts of the 1944 conference that established the International Monetary Fund, the World Bank, and the monetary system that provided a framework for a quarter-century of rapid world economic growth. The transcripts offer insights into the course of the conference not present in the less detailed, sanitized conference proceedings released in 1948.

The book was issued as an e-book in 2012 and in hardcover in 2013. At the time, my co-editor Andrew Rosenberg and I agreed that we would limit our copyright in the electronic version to ten years. Too many books become unavailable because they are out of print but still under copyright in today’s absurdly long copyright durations.

Just Before Bretton Woods gives the previously unpublished details of the Atlantic City, New Jersey conference that wrote the draft agreements from which the Bretton Woods conference started. Unlike Bretton Woods, Atlantic City was the subject of little writing before my co-editor Gabrielle Canning and I pulled together the conference documents from the National Archives of the United Kingdom and the U.S. National Archives. The book was published in 2019, in time for the 75th anniversary of the conference. As with The Bretton Woods Transcripts, we agreed to limit our copyright in the electronic version to ten years. Given the significance of 2024 as the 80th anniversary of the Atlantic City and Bretton Woods conferences, though, we decided to relinquish the electronic copyright now.

We have used the occasion of the new electronic editions to correct some errors in the original editions and to add a bit of material we have found since.

I thank Andrew Rosenberg and Gabrielle Canning for their work on the books, which complemented my experience with the energy of youth; Jeff van den Noort for designing Web pages that made the books and thousands of pages of accompanying archival material easily accessible; and Larry Goodman for his willingness to publish the books under the CFS imprint.

Copernicus and Asian Monetary Monitor now available

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Now available free at the Internet Archive are two publications that will be of interest to some readers of this blog.

Nicolas Copernicus’s brief Essay on Money shows that Copernicus’s sagacity extended beyond astronomy. In a few pages he diagnoses inflation and a number of its ill effects.

The Asian Monetary Monitor was published every two months in Hong Kong from 1977 to 1996. It cast an eye on monetary and financial developments in East and Southeast Asia. The editor was John Greenwood. The publication is particularly noteworthy for Greenwood’s articles in advance of Hong Kong’s monetary crisis of 1983 explaining why Hong Kong was at risk of a crisis and how to prevent it or escape from it. When the crisis came, Hong Kong’s government adopted Greenwood’s suggestion of returning to the currency board system. The system endures today.

The Experience of Free Banking

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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

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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

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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

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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

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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

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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

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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.