Odd Lots The Hidden History of Eurodollars, Part 3: Spinning Out of Control
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Jan 16, 2025 Lev Menand, a Columbia Law School professor, and Josh Younger, a policy advisor at the Federal Reserve Bank of New York, dive into the tumultuous history of eurodollars. They discuss the pivotal moment of Nixon's move away from the gold standard in the 1970s and its lasting impact on modern finance. The conversation also explores how geopolitical tensions, particularly from the 1973 oil embargo, reshaped global monetary policies and created economic turbulence. Their insights illuminate the complexities that define today's financial landscape.
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Eurodollars and the Great Depression
- In the early 1970s, Eurodollars were blamed for funding speculation against the dollar.
- The potential collapse of the dollar system raised fears of another Great Depression due to monetary contraction.
Connally's Confidence
- Nixon's Treasury Secretary, John Connally, expressed confidence in the US's approach to the monetary system after the Nixon Shock.
- Connally hinted at ongoing negotiations with other nations and the President's willingness to take further action.
Shifting Perspectives on Eurodollars
- After the Nixon Shock, the need for Eurodollars to support Bretton Woods diminished.
- This shift allowed for consideration of regulating the Eurodollar market, but multilateral agreement proved difficult.