Odd Lots The Hidden History of Eurodollars, Part 2: Defending the Dollar System
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Jan 15, 2025 
Lev Menand, a Columbia Law School professor, and Josh Younger, a Federal Reserve Bank of New York policy advisor, delve into the fascinating history of the Eurodollar market. They discuss its evolution during the tumultuous 1960s and how it transformed the dollar into a strategic asset amid Cold War tensions. The duo explores the interplay between monetary policy and international finance, addressing challenges like dollar stability and liquidity. They also highlight pivotal figures and events that shaped American economic policies during this critical period.
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Bretton Woods System Crisis
- In 1960, the monetary system faced a crisis during Kennedy's presidential race.
- The crisis stemmed from the Bretton Woods system, established in 1944 to restructure the global monetary order after World War II.
Bretton Woods Instability
- The Bretton Woods system allowed foreign central banks to exchange dollars for gold at a fixed rate of $35 per ounce.
- However, increased demand for gold for non-monetary purposes led to a rise in gold prices in other markets, creating instability.
Declining Gold Reserves
- The US gold reserves started declining as its dollar liabilities increased, resembling a slow-motion bank run.
- This became a significant election issue in the Kennedy-Nixon race, with Nixon warning of Kennedy's potential impact on the dollar.