Benn Steil Quotes
For many countries, monetary sovereignty is nothing more than an unattainable ideal.
Benn Steil, Senior Fellow & Director of International Economics, Council on Foreign Relations, “Taper Trouble”, Foreign Affairs, July/August 2014
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This objective finally reached its peak in the Nixon administration when the U. S. went off the gold standard. 75 Years after FDR tried to make the U. S. dollar more resilient, America had been so successful that many foreign governments having the same problem of little or no control over their currency, have pegged their currency to the U. S. dollar, thus gaining our stability.
FDR was then a candidate for the Democratic Vice Presidential Nomination. This statement shocked some of the conservative French and British delegates and officials such as Ramsay MacDonald, Georges Bonnet, and Neville Chamberlain, but economist John Maynard Keynes strongly approved of Roosevelt Roosevelt’s statements. At issue was whether or not the major currency powers should confer frequently and set the international currency exchange rates or should the rates float and be determined at any point by the free market in currency. FDR held the latter view which was opposed to the positions of the conservative banker-oriented delegates from the European counties, However Roosevelt’s statement was considered “harsh” and “vituperative” by the conservatives and the entire conference collapsed over them. FDR admitted that perhaps he had been too strong and blunt in his language. An irony of this quotation is that 80 years later the positions of liberals and conservatives had both flip-flopped. It became the conservatives who adopted the FDR free market for currency exchange while many liberals called for government intervention and agreement on exchange rates to prevent instability.
“Pegged” exchange rates are a country’s money where the Government sets the value of the money in terms of some other currency—usually American dollars. The advantage of a pegged currency is that it is stable and does not fluctuate day to day. The disadvantage is that people realize that the value is artificial and other countries will not accept the pegged currency. Worse natives try and get as many dollars as they can because the fear that the Government will devalue and change the rate of exchange of the pegged currency.
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England compromised. They did not give up their own currency—the Pound, but they did make the Euro legal tender, so both currencies can be used in England.
Currency Pegs are policies and commitments that countries make to sate that their currency henceforth will have a fixed relationship to another currency—usually the American Dollar, the English Pound or the Euro. If a second and even more countries also agree to peg their currency to the same, then the counties who are pegging can trust each other’s currency providing economic stability and facilitating trade.
President Richard Nixon, a conservative Republican did not agree with this view as it was he who led America to abandon the gold standard to back its money.
This is the first major history of banks written in the United States.
Benn Steil is an American economist and writer. He was educated at Nuffield College, Oxford and at the Wharton School of the University of Pennsylvania. Steil is the senior fellow and director of international economics at the Council on Foreign Relations. He is the founder and editor of the journal International Finance. He has been awarded the New-York Historical Society’s Prize for best book on American history, the American Academy of Diplomacy’s Douglas Dillon Book Prize, the Hayek Book Prize, and the Spear’s Book Prize in Financial History..
