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Fed Links To Paper Extremely Critical Of Monetary Intervention... Then Pulls Link

Tyler Durden's picture




 

Submitted by Robert Wenzel via Economic Policy Journal,

The Federal Reserve Bank of  Cleveland earlier this week tweeted out a notice of a working paper by economists, Michael D. Bordo, Owen F. Humpage and Anna J. Schwartz.

The paper was tiltled: U.S. Intervention during the Bretton Wood [sic] Era:1962-1973

At the time the paper was written in 2011, Bordo taught in the Department of Economics, Rutgers University, Humpage was an economist at the Federal Reserve Bank of Cleveland and Schwartz worked at the National Bureau of Economic Research.

The web page containing the paper is now empty. From the Google search:

US Intervention during the Bretton Wood Era: 1962-1973www.clevelandfed.org/.../wp1108.pdf?...

Federal Reserve Bank of Cleveland

Apr 8, 2011 - U.S. Intervention during the Bretton Wood Era: 1962–1973 by Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz. By the early 1960s, ..

And  the tweet about the paper has been deleted. I downloaded a hard copy of the paper,with the Federal Reserve of Cleveland logo on the front page, before it was taken down,

 

There appears to be a very similar version of the paper at the National Bureau of Economic Research, but it, for one, does not have the typo in the title, Wood instead of Woods.

It is probably no surprise that the paper is no longer featured at the Cleveland Fed. The paper is a detailed 87 page report on the massive interventions in currency markets that the Treasury and the Federal Reserve conducted during the era of the Bretton Woods exchange rate system. The paper is exceptionally critical of the market manipulations that took place during that period.

This is from the introduction (my bold):

In an attempt to neutralize speculative activity, the U.S. Treasury began intervening in the foreign exchange market in March 1961, after a 30 year hiatus. A year later, the Federal Reserve began intervening for its own account with a primary focus on providing foreign central banks with temporary cover for their unwanted dollar exposures.

 

These operations were stop-gap. In the early 1960s, U.S. administrations believed thatmuch of the pressure on the balance of payments was transitional and largely related to the postwar global recovery, so finding a mechanism to buy time for an inevitable adjustment seemed appropriate. By the late 1960s, however, Bretton Woods’ severe structural problems, which a rising U.S. inflation rate severely aggravated, were apparent. The maintenance of Bretton Woods required elected officials in the United States and abroad to sacrifice domestic economic goals for international objectives, a trade-off they would not make. The U.S. closed its gold window in August 1971, and generalized floating commenced in March 1973.  

 

As a delaying tactic, U.S. foreign exchange operations were often successful. They raised the potential costs of speculation and provided cover for unwanted, temporary, and ultimately reversible dollar flows. They delayed the drain of the U.S. gold stock. But to the extent that these devises substituted for more fundamental and necessary adjustments and postponed the inevitable collapse of Bretton Woods, they were a failure. In addition, the institutional arrangement underlying U.S. intervention operations raised important, long-lasting issues about Federal Reserve independence.

In addition to the paper's exceptional critique of the exchange manipulations, the paper offers a valuable insight into how the Federal Reserve operates during periods of  crisis. Here is what the Fed did, according to the paper, immediately after the assassination of President Kennedy and what it did at the height of the Cuban Missile Crisis:

U.S. authorities occasionally intervened to calm developments that, if left unchecked, might grow to threaten the existing parity structure. The most notable occasion occurred immediately following President Kennedy’s assassination on 22 November 1963. At this time, trading in the New York market essentially stopped. To prevent panic selling, which seemed to afflict the stock market at the time, the Foreign Exchange Desk of the Federal Reserve Bank of New York (FRBNY) placed large orders to sell all major currencies at the exchange rates that existed just prior to the assassination. By the close of business, the Desk had sold $23.5 million equivalent German marks, British pounds, Netherlands guilders, Canadian dollars, and Swiss francs. On that same day, the Bank of Canada bought $24.5 million to support the dollar against its Canadian counterpart. (The System then acquired $14 million from the Bank of Canada through its swap  arrangement.) The European markets were closed at the time of the assassination. When they reopened, foreign central banks intervened in their spot markets, but by then, markets had settled down.

 

Similarly, news of the Cuban missile crisis on 22 October 1962 generated large financial flows out of dollars and into Continental currencies, especially Swiss francs. If left unchecked, the Desk feared, these financial flows might raise doubts about the structure of the exchange rates. Moreover, by placing unwanted dollars in the Swiss National Bank, they contribute to a potential drain on the U.S. gold stock. The Federal Reserve System responded by selling $8 million equivalent francs into the Swiss spot market through the Swiss National Bank and $2.3 million equivalent francs into the New York spot market. (The Swiss National Bank acquired $50 million through intervention, and the System drew $20 million equivalent Swiss francs through its swap line with the BIS on 31 October 1962 and bought dollars from the Swiss National Bank.) The System also sold $700 thousand equivalent Dutch guilder in the New York spot market at the onset of the Cuban missile crisis.

Take this as an object lesson. The Fed does intervene in markets during crisis periods and it is very likely that the definition of "crisis" has broadened, since the 1960s, to cover a lot more than assassinations of US presidents.

There are many other lessons to be learned from the paper, including the Fed's perspective on price inflation, which in my view is eerily similar to the present day situation. (I discuss this in much greater detail in the  EPJ Daily Alert). Suffice to say for this post, my view is that the Fed will eventually be in a position similar to the early 1970s, when they ignored signs of growing price inflation to help continue to boost employment and the economy.

 

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Fri, 02/13/2015 - 16:15 | 5782226 ghostzapper
ghostzapper's picture

obviously forget to have the Rothschilds sign off on that pup before distributing it.  Duh.

Fri, 02/13/2015 - 16:31 | 5782307 nink
nink's picture

"placed large orders to sell all major currencies at the exchange rates that existed just prior to the assassination"

Inside job?

Fri, 02/13/2015 - 16:42 | 5782357 max2205
max2205's picture

This sure is a No Shit Sherlock article 

Fri, 02/13/2015 - 16:53 | 5782387 nevadan
nevadan's picture

This paper and a bunch more is referenced in a video series about the ESF.  Well worth the time investment to watch.  The  NY Fed is just a tool.

http://www.marketskeptics.com/2011/06/the-esf-and-its-history.html

Fri, 02/13/2015 - 21:11 | 5783234 El Oregonian
El Oregonian's picture

Surely we can't have a category 5 Hurricane approaching when we've Forecast/Manipulated a report of clear sailing ahead.

Fri, 02/13/2015 - 22:48 | 5783402 SumTing Wong
SumTing Wong's picture

You should read anything that Anna Schwartz writes. I also recommend Walker Todd. He was asked to leave the Cleveland Fed for some of the papers he wrote. Good man.

Edwin Vieira is another good one.

Fri, 02/13/2015 - 16:54 | 5782393 maskone909
maskone909's picture

speaking of the chosen people, anybody see roseanne barr's most recent rant against anti semites?  take a look at her twitter feed she is fucking nuts!

she is calling for a nuclear strike on all of the "anti-semetic TOADS" at uc davis.  she wants the whole entire school nuked.  enjoy!

 

https://twitter.com/therealroseanne

 

make sure to tell her ZH sent you

Fri, 02/13/2015 - 17:26 | 5782578 realmoney2015
realmoney2015's picture

Exactly! "The Fed does intervene in markets during crisis periods"

The Fed intervenes in markets during all periods! It is nuts that the Federal Reserve prints trillions upon trillions of dollars and is not audited. They are a private organization responsible for the America's entire currency supply and we are just supposed to trust them. I mean, c'mon. It's absoluetly crazy. The little guy on main street is audited frequently. But these megabankers who secretly own the fed print funny money for over a century without an audit. It is clear who is really running the country (and the world). I truly hope (and actually believe) that we are in a transition period. The world is waking up to the fact that we aren't enemies of each other, rather we are enemies of the money changers. We need to kick up the pressure a couple of notches. The next financial crash could be pivotal. We can move towards freedom and away from slavery! 

Every one of us that is even a little bit awake to what is going on has the responsibility to help educate our fellow man. It is up to us, not the media, to turn the tides and break the chains of our slavery. Have those 'akward' conversations with people about the fed! When you buy things cash, explain to those around how credit cards raise prices by about 3% for convenience. It's tax time right now...I'm still relatively new at paying filing taxes (28 yrs old). I cannot believe that people just blindly file taxes and not get pissed off enough to want to change things. Filing taxes are a huge pain...why do we pay income taxes. It's all due to the Fed. 1913 ruined our counrty. It's time we take it back. Not through violent revolution (yet), but through small changes that make huge ripple effects.

I have been awake now for a couple of years. I've been waiting for someone (like Ron Paul) to save us from this madness. H has been great in waking up the masses (including me!), but no one person can make real change. We all have our part! This is why I started Scent Savers - candles with a silver coin prize: https://www.etsy.com/shop/ScentSavers?ref=hdr_shop_menu

Honestly, I do hope to make money on these candles, my main objective is to help wake people up to our current financial tyranny. That's why I gave some to my friends and family. That is why I include little blurbs on the Federal Reserve and IRS. 

Hopefully the internet remains somewhat free so sites like this and the dailypaul.com can remain active. There are many sites and videos to send people to. Mike Maloney's hidden secrets of money are my personal favories. I like to send my loved ones here. ANd if they are receptive, or ask questions, I like to give them a candle so they can see real money without having the intimidation of buying precious metals. 

 

Sorry for the rant....just had some conversations about the Fed today, so I'm a litlle worked up! End the Fed!!

Fri, 02/13/2015 - 17:37 | 5782630 Hohum
Hohum's picture

It is not mentioned often, but doesn't the Fed have to intervene to maintain ZIRP?  The fed funds rate isn't going to stay at 0% by decree.

Fri, 02/13/2015 - 18:13 | 5782761 TeethVillage88s
TeethVillage88s's picture

I think there was something in the news today

- Nation's last black-owned banks in fight for survival...
- http://research.stlouisfed.org/fred2/series/USNUM (total US Banks Decline Steeply, Systematically)

- Economist warns world revisiting 'ghosts of 1930s' as currency wars spread...
- Central Banks Hoarding Gold...
- Art world shakeup: Painting by Hitler sells for three times a Picasso...

- JEB BRINGS IN THE BIG BUCKS...
- Unprecedented funds far outpacing rivals...

- NEW INTERNET RULES TO JOLT INDUSTRY...
- Obama's cyber push spurs privacy fears...
- Deepening estrangement between Silicon Valley and govt...
- GOOGLEFACEBOOKYAHOO boycott conference...
- 'Homeland Security' to be put in charge of info spying...

- REVEALED: Loophole for illegals to vote in elections...
- 'Sneaky' Path to Citizenship...
- Immigration Pray-Ins Swamp Congressional Offices...

And as if DHS wasn't the biggest waste of any government in the 20th Century... the whine for more money like the Pentagon & Right Wing Think Tanks Year after Year, on and on Droning like Bankers lobbying for new Breaks:

- DHS: SHOW ME THE MONEY!
- Frustrated Republicans taste limits of majority control...

1964 - Gulf of Tonkin, Congress gives up War Powers, Legislative Powers, and Budget Powers
1973 - War Powers Resolution (Allows 60 days combat/war without congressional declaration)
1974 - Federal Energy Administration Act of 1974 (R. Nixon)
1978 - Bankruptcy Reform Act of 1978,
1980 - Depository Institutions (J. Carter, followed by S&L Crisis, 5000 convictions, RTC)
1981 - Executive Order 12287, (R. Reagan, removed price controls on Petrol)
1984 - Caribbean Basin Initiative (Free Imports to USA)
1992 - Energy Policy Act (H.W. Bush)
1994 - NAFTA, Deregulation of Trade, 3 Nations (W. Clinton)
1995 - Community Reinvestment Act, the Clinton Admin urged flexibility,
1995 - HUD advocated greater involvement of state and local organizations
1996 - Energy (W. Clinton, followed by ENRON Scandal)
1996 - Telecommunications Act (W. Clinton, cross ownership)
1996 - Start of a Period of Accounting Fraud in USA which continues today
1997 - M2 Money Velocity Top
1998 - Clinton's Kosovo War (over 60 Days)
1998 - Brooksly Born Rejected on her concerns on OTC Derivatives
1998 - Derivatives expanded and were not regulated
1998 - Citicorp & Travelers Insurance Merger
1999 - Gramm–Leach–Bliley Act (Phil Gramm, W. Clinton, followed by 2008 Financial Crisis)
1999 - bombing campaign in Kosovo (W. Clinton, over 60 days)
2000 - Commodity Futures Modernization Act of 2000 (P. Gramm, W. Clinton, derivatives)
2002 - McCain–Feingold Act (G.W. Bush, Campaign Finance, soft money unlimited)
2005 - Energy Policy Act (G.W. Bush, subsidies, excluded clean air Water acts)
2005 - Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
2005 - CAFTA-DR Ratified, 2006 El Salvador, Honduras, Nicaragua, Guatemala
2008 - 2014 QE & LIRP/ZIRP (B. Bernanke, J. Yellen, B Obama)
2009 - 2014 Continuing Resolutions in which Congress gives up Budget Powers
2010 - Citizens United v. Federal Election Commission (money is free speech for corps)
2011 - US combat in Libya (B Obama, over 60 days)
2014 - lift ban on crude oil exports (B Obama, Commodities Deregulation)

Fri, 02/13/2015 - 16:33 | 5782313 Dr. Richard Head
Dr. Richard Head's picture

Either that or one is required to have eaten lead paint chips as a child for a post on the Cleveland Federal Reserve Board...

Sherwin Williams CEO Christopher Connor named Chaiman of the Federal Reserve Cleveland Board - http://www.cleveland.com/business/index.ssf/2014/11/sherwin-williams_ceo...

 

Fri, 02/13/2015 - 17:01 | 5782234 Kaiser Sousa
Kaiser Sousa's picture

glad u got around to this...

posted in the previous Gold post...

just sayin...

much props still.

and most imprtant than all else is the fact that despite what  that lyin sack of shit Bernanke said in front of congress, THE SOCIOPATH MONEYCHANGERS KNOW THAT THERE R ONLY 2 FORMS OF REAL MONEY - GOLD AND SILVER...

Fri, 02/13/2015 - 16:17 | 5782240 ebworthen
ebworthen's picture

Someone at the Cleveland FED got a call from J.P. Morgan Chase or Goldman Sachs.

Fri, 02/13/2015 - 16:53 | 5782392 Alea Iactaest
Alea Iactaest's picture

A disordered currency is one of the greatest political evils. -- Daniel Webster

 

Fri, 02/13/2015 - 16:19 | 5782250 wmbz
wmbz's picture

   "Looking at this from a historical point of view, you realize that 100 years ago, there were only five central banks in the world. Now every country in the world has a central bank, and they’re all doing exactly the same thing: creating currency units out of thin air as fast as they think they can get away with. More broadly, a century ago, governments were very limited in their power to regulate the day-to-day lives of citizens.

   "They were actually quite weak. The whole world has transformed tremendously since then, starting with the mega-disaster of World War I, and governments now have unprecedented power over people’s lives—made possible not only by laws, but by the power of central banks… and by the fact the average person has been programmed to believe that’s the way it ought to be."  ~ Doug Casey

Fri, 02/13/2015 - 16:20 | 5782260 Carpenter1
Carpenter1's picture

Audit the fucking FED, and we'll have an end to all this shite. All the dead bodies are there, and there's millions of them. It will be many magnitudes worse than anyone thinks.

Fri, 02/13/2015 - 16:20 | 5782261 Jack of All Trades
Jack of All Trades's picture

We were for it before we were against it

Fri, 02/13/2015 - 16:25 | 5782280 pound the vix
pound the vix's picture

a 3% drop in the S&P is now treated equal to the Cuban Missile crisis and the assassination of President Kennedy!

Fri, 02/13/2015 - 16:35 | 5782321 Ignatius
Ignatius's picture

In fact, they thought that the assassination of JFK was so important they did it themselves.

Fri, 02/13/2015 - 16:33 | 5782316 Dr. Richard Head
Dr. Richard Head's picture

That was so long ago.  This time is different and they banks are really big and complicated and shit. 

Sat, 02/14/2015 - 00:39 | 5783589 RaceToTheBottom
RaceToTheBottom's picture

Plus, this time they are doing God's work....

Fri, 02/13/2015 - 16:34 | 5782318 Bill of Rights
Bill of Rights's picture

Makes you say Hmm, why would the Cleavland fED Be Looking at this out dated information.

Fri, 02/13/2015 - 16:39 | 5782345 wmbz
wmbz's picture

The only way that the un-fed will ever be audited by an outside agency is long after they have blown the whole fucking system up! It will not happen before.

Congress could demand an audit start tomorrow, wonder why they don't?  Ask your con-gressman! As you would expect you will not get anywhere near an honest answer, not that they even know what honesty is.

This game was rigged a long,long,long time ago. The un-fed will dispatch any congressamn piss-ant that bothers them to much.

Fri, 02/13/2015 - 16:49 | 5782378 Dre4dwolf
Dre4dwolf's picture

1/3rd of Zero Hedge readers are probably more capable of running "The Fed" than the people currently running it.

The fact that they linked to the Archaic research is a testament to that, this stuff is old news . . . baby steps in comparison to what information is out there.

 

Fri, 02/13/2015 - 17:16 | 5782519 RockyRacoon
RockyRacoon's picture

The paper is April, 2011.  New info on old actions -- but, of course, things are different now!

Fri, 02/13/2015 - 17:03 | 5782449 tarpuranus
tarpuranus's picture

Just found a copy at http://press1.org/

Fri, 02/13/2015 - 17:22 | 5782554 Armchair Bear
Armchair Bear's picture

is the paper still available or not?

 

Fri, 02/13/2015 - 17:26 | 5782580 kchrisc
kchrisc's picture

LOL

"Guillotine the Fed. Audit the heads."

The banksters need to repay us.

 

On the back, left-side, of the green fiat "one dollar" certificates forced on us by the FedRes' and their violence-puppets, the DC US, is inscribed their goal: http://tinyurl.com/nk37wan

Time to flip that pyramid, and bury the top of it into the muck from which it arose.

Fri, 02/13/2015 - 17:35 | 5782625 cart00ner
cart00ner's picture

Who was it that said, 

"History is written by the victors"

It is also deleted by the victors. I see these new internet laws making that task a lot easier. >Long live ZH.

Fri, 02/13/2015 - 21:13 | 5783237 bilejones
bilejones's picture

History may be written by the victors but it's a never spoken of fact that it's the losers who decide when a war ends: See, US:Vietnam.

Fri, 02/13/2015 - 17:39 | 5782640 The Econ Ideal
The Econ Ideal's picture

ZH/Tylers: Please publish the censored paper in full. Thanks. 

Fri, 02/13/2015 - 18:08 | 5782746 Meatballs
Meatballs's picture

As posted above-  http://press1.org/

 

Reading it now.

Fri, 02/13/2015 - 17:47 | 5782665 lasvegaspersona
lasvegaspersona's picture

The fact that Anna Schwartz is an author suggests that this was not meant to be hidden. Her stature would not allow someone to try to hide it. I'm betting it will be re-released after editing or something.

It would be akin to trying to hide a Bernacke release.

The above link works and I'm sure many have it on their own computers now.

Fri, 02/13/2015 - 18:21 | 5782781 Teresa_Lo
Teresa_Lo's picture

There is a better, 2012 version of the paper at

http://www2.clevelandfed.org/research/workpaper/2012/wp1232.pdf

Bretton Woods, Swap Lines, and the Federal Reserve’s Return to Intervention

Michael D. Bordo, Owen F. Humpage, and Anna J. Schwartz

 

 

Fri, 02/13/2015 - 18:22 | 5782788 TeethVillage88s
TeethVillage88s's picture

Conversion of USD to Gold could be seen as a Financial Attack or a Strategy against the USD if conducted by foreign agents.

- Clearly if there exists a national risk to economy, financial markets or USD, then the FED Would have some Links to the Pentagon and Think Tanks like Rand

- So FED = A military Agency
- Attempts to liberate gold from the USA would be scheduled over a long period to dispel notions of an attack on USD or Weakness in its Currency

- Question: Who defends the USA against Financial Attacks, Economic Attacks, Economic Sanctions, Currency Wars, Attacks on Currency, Attacks on US Petrol Dollar???
- Answer: CIA, NSA, NRO, USCG, All the Services, FED... and a Banking Cabal, Zaibatsu

Fri, 02/13/2015 - 19:02 | 5782899 polo007
polo007's picture

Hey guys,

You can find a copy of U.S. Intervention during the Bretton Woods Era: 1962-1973 at the following link:

http://www.nber.org/papers/w16946.pdf

U.S. Intervention During the Bretton Woods Era: 1962-1973

Michael D. Bordo, Owen F. Humpage, Anna J. Schwartz

NBER Working Paper No. 16946

Issued in April 2011

NBER Program(s):   DAE   ME

By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the official price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In response, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to finance their own interventions. The Treasury also began intervening in the market. The operations often forestalled gold losses, but in so doing, delayed the need to solve Bretton Woods' fundamental underlying problems. In addition, the institutional arrangements forged between the Federal Reserve and the U.S. Treasury raised important questions bearing on Federal Reserve independence.

Fri, 02/13/2015 - 19:09 | 5782916 Hungarian Pengos
Hungarian Pengos's picture

I actually know a guy that's a Research Analyst at the Cleveland Fed.  (Hello NSA - you can triangulate my location)  Cool guy, one of the brightest guys I've ever met, has a mega hot wife, drinks a lot and owns silver, land out in bumblefuck Ohio, and thinks the whole economy is a rigged mirage.

I'll bet 5 Silver Maples that he is behind this caper.  His name is Bill Brasky!!  https://screen.yahoo.com/tales-bill-brasky-airport-bar-000000422.html

Sat, 02/14/2015 - 07:28 | 5783888 Flying Wombat
Flying Wombat's picture

OK.  Hate to pour cold water on the "pulls paper" part, but...

I discovered that the paper is still on the Cleveland Fed's website, but only accessible with a different link. I didn't see what Robert saw w/ respect to that Twitter-provisioned link and subsequent page at the Fed. It's possible that the webmaster over there was simply sticking the file as a "feature" for a period of time (notice the website directory names "Newsroom" and "media" below) and perhaps just moved it off that status and removed the link that Wenzel saw - innocently. Who knows. But with some research Kung-Fu, I found that it still is on the server:

https://www.clevelandfed.org/en/Newsroom%20and%20Events/Publications/Workin
g%20Papers/~/media/0F8B7074F14B4773B7E1EF5BD97F7A81.ashx

Eric Dubin, Managing Editor, The News Doctors
http://thenewsdoctors.com/tag/eric-dubin/

Do NOT follow this link or you will be banned from the site!