America and the Euromarkets

In explaining the Euromarkets and the re-emergence of global finance in the late 1950s and early 1960s as being principally driven by actions taken in Britain, by default, this book is also arguing that the US played a far less important role in these innovatory developments than is generally thought. In fact, as this chapter will show, the American banking community had almost no involvement in the Eurodollar market until late 1959 and the US monetary authorities did not really understand how it operated until 1960–62, when forced to recognise its significance in the context of the declining fortunes of the US balance of payments and its impact on US gold stocks and the operation of the Bretton Woods System. Designed to prevent a repeat of the problems experienced under the gold standard of the inter-war years, Bretton Woods was essentially a ‘monetary compromise’, based not on a pure gold standard, whereby all currencies could be exchanged for gold at a fixed price, but on a Dollar-Gold Standard, which pegged all other currencies to the dollar at, essentially, a fixed rate of exchange, with only the dollar exchangeable for gold on demand, and then only by official foreign holders of dollars — in other words, central banks and other official institutions such as the IME