US inflation and the imbalances of the Bretton Woods System, 1965-1973
This chapter argues that the key deep underlying fundamental for the growing international imbalances leading to the collapse of the Bretton Woods System between 1971 and 1973 was rising US inflation since 1965. It was driven in turn by expansionary fiscal and monetary policies - the elephant in the...
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| Veröffentlicht in: | Economic globalization and governance |
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| Format: | UnknownFormat |
| Sprache: | eng |
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2021
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Tag hinzufügen | Zusammenfassung: | This chapter argues that the key deep underlying fundamental for the growing international imbalances leading to the collapse of the Bretton Woods System between 1971 and 1973 was rising US inflation since 1965. It was driven in turn by expansionary fiscal and monetary policies - the elephant in the room. What was kept in the background at the Camp David meeting on August 15, 1971 (when President Richard Nixon closed the US gold window, as well as imposing a ten per cent surcharge on all imports and a ninety-day wage-price freeze), was that US inflation, driven by macro-policies, was the main problem facing the Bretton Woods System, and that for political and doctrinal reasons was not directly addressed. Instead, President Nixon blamed the rest of the world rather than correcting mistaken US policies. In addition, at the urging of Federal Reserve Chairman Arthur F. Burns, Nixon adopted wage and price controls to mask the inflation, hence punting the problem into the future. I argue the case that the pursuit of sound monetary and fiscal policies could have avoided much of the turmoil in the waning years of Bretton Woods. Moreover, I point out some of the similarities between the imbalances of the 1960s and 1970s - especially fiscal and the use of tariff protection as a strategic tool, as well as some differences - relatively stable monetary policy and floating exchange rates. |
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| ISBN: | 9783030532642 |