TARGET balances, Bretton Woods, and the Great Depression
Michael Bordo 21 March 2014
Since 2007, there has been a buildup of TARGET imbalances within the Eurosystem – growing liabilities of national central banks in the periphery matched by growing claims of central banks in the core. This column argues that, rather than signalling the collapse of the monetary system – as was the case for Bretton Woods between 1968 and 1971 – these TARGET imbalances represent a successful institutional innovation that prevented a repeat of the US payments crisis of 1933.
During the Eurozone crisis, an analogy was made between the events in Europe between 2007 and 2012 and the collapse of the Bretton Woods System between 1968 and 1971. There has been a build-up of TARGET liabilities since 2007 by some central banks (notably Greece, Ireland, Portugal, and Spain, or the ‘GIPS’), and of TARGET assets by Germany and others.
Economic history International finance
ECB, eurozone, euro, global imbalances, Central Banks, financial crisis, Great Depression, Eurosystem, Eurozone crisis, Bretton Woods, TARGET
Putting the ‘system’ in the international monetary system
Michael Bordo, Angela Redish 20 June 2013
The Eurozone has been going through an existential crisis since 2010. The column discusses research that draws an analogy between the careful planning in the 1980s leading to the creation of the euro and the planning that led to the Bretton Woods system. The outcome for the Eurozone, as in the earlier creation of a man-made international system, may be similar – collapse or at least major reworking.
The Eurozone and Bretton Woods are prime examples of planned international monetary arrangements designed in each case to deal with the perceived flaws of earlier more ‘spontaneous order systems ‘based on domestic monetary institutions (Gallarotti 1995).
Economic history Macroeconomic policy
eurozone, monetary policy, Bretton Woods
Making the European Monetary Union
Harold James 17 February 2013
Recent policy and academic debates have begun to influence Eurozone reform. But how sound is the advice we give out? This column argues that calls for a Eurozone or full-fledged EU superstate are overstated. Yes, developing an adequate system of European banking supervision is a matter of urgency if we hope to tackle the threat posed by an overdeveloped and opaque financial system. But calling for a superstate misunderstands the reasons politicians introduced the euro in the first place.
It is often claimed – especially but not only by US economists – that the travails of the euro show that it is impossible to have a monetary union in the absence of a political union, and that Europe is necessarily embarking on a US-style experiment in federalism. Thomas Sargent used his Nobel Prize speech to urge Europeans to follow the model of Alexander Hamilton (2011). Likewise, Paul de Grauwe recently stated the case quite simply: “The euro is a currency without a country. To make it sustainable a European country has to be created” (2012).
Economic history EU institutions
Eurozone crisis, Bretton Woods, German surplus
A new IMF reserve currency without the problems of the substitution account – The creation of Special Transaction Rights
Martin Skala 20 April 2011
With discontent at the current state of the international monetary system still lingering, is there an alternative to the decades-old discussions about gold, Bretton Woods Systems, and Special Drawing Rights? This column claims there is. It proposes a new IMF reserve currency with the creation of Special Transaction Rights.
In the wake of the global financial crisis, the discontent with the current international monetary system lingers on (see for example Vines 2010). But is there an alternative given the decades-old discussions about gold, Bretton Woods Systems, Bancor, and Special Drawing Rights (SDRs)? Yes, there is.
Global crisis International finance International trade
IMF, Special drawing rights, International Monetary System, Special Transaction Rights, Bretton Woods