 As long as the international monitor system holds, it seems to me we're not going to get any sustained inflation, that the analogy with the 70s is not correct. And I've been saying that since the beginning of this, just channeling Charlie, and saying that's what he would say, and so let me try that out and see, and it seems like maybe it's right. It's starting to look more right than it did a year ago when everyone was saying the sky is falling. And Powell is explicitly analogizing himself to Volker. However, he's not waiting for the system to fall apart before he comes in. He's coming in much earlier after the COVID shock. And these other shocks, the Ukraine shock, the other shocks, the world system is absorbing a lot of shocks. And so what is remarkable to me, and I think is what Kinleberger would be remarked, is how so far the international monitor system seems to be holding, seems to be holding pretty well. So I'm Professor Perry Merling. I'm a professor at the Pardee School of Global Studies at Boston University. I write books. That's what I do. This is my fourth one. And what led me to write all of them is that I'm trying to understand how money works in the modern economy. I had already done sort of monetary economics and I had already done finance. So it seemed the next logical thing was international finance and the global role of the dollar. And initially, in fact, I got a grant from INET to start this thing like 10 years ago. And it was meant to be a pair to my third book, The New Lambert Street, which was about sort of a biography of the Fed. And I realized what was wrong with that book was that the dollar is a global thing. And that by focusing on the Fed, it was too domestic. So I decided I needed to do international money. But then I found Charlie Kinderberger and I realized, oh, I can write, I can hang the whole story on this man because his dates are like perfect. And so that's when I started to do this. And it took me longer than I thought simply because life intervened. But so I'm pretty happy that it's now in the can. It's actually quite a long and varied career. But when you say it's a household name, you're referring probably to his best-selling book, Mania's Panics and Crashes, which is, I believe, now going into its eighth edition, long after he's parted. So he lives on in that way. But in some ways, although that's a popular book and it's what he's known for, I think that book is often quite misunderstood. And if you look at the rest of him through that lens, you don't understand this guy. So the important thing to appreciate with him is that he really had three careers. He did a PhD at Columbia in 1937, got the PhD, with the idea of avoiding his father's fate to be a lawyer. He didn't want to be a lawyer, so he became an economist. Figured that, more interesting, I guess. But there were no jobs because it's 1937 in academia. So he was for 12 years in public service. And he had a whole career there at the Fed, at the Bank for International Settlements, back at the Board of Governors. And then during the war, he had really very distinguished war service in the OSS and then back in the State Department and the Marshall Plan. So it wasn't until 1948 that he started his second career at MIT. And that also leads people to misunderstand him because they think they know what MIT is. It's like the greatest department in the world. But in 1948 it wasn't. It was really just an ag school, tech school, engineering school. And he was hired, basically, to help build it, which he did over the next 30 years. And his third career began in 1976 when he was forced to retire from MIT because at that time they had mandatory retirement at age 65. So he's already 65 by 76. And that's when he wrote Mania's Panits and Crashes, actually, in order to supplement his rather meager retirement income. And it worked in that regard. But he also went on to write other things as well and had a good, long career lasted until 2003. So he wrote more than 30 books and more than 300 articles. So my book is divided into those three episodes of his life. So it's a biography. But as I said, the reason I wanted to write the book was not particularly because I was fascinated by Kindleberger, although, of course, I had to become fascinated by him. But because I was trying to understand the rise of the global dollar system and how international finance works and so forth, and I just described Kindleberger's choppy life, interfered with by the Great Depression, interfered with by World War II. The dollar also had a choppy life and interfered by the same things, the Depression and the World War II. Bretton Woods sort of consolidated it for a while in 1944, just when Charlie's joining academia. But then Nixon decided he didn't like that anymore. In 1971, he basically killed Bretton Woods, which Charlie always viewed as a crime. He called it the crime of 71. And it took a while. The 70s were a bad time. That was when I was sort of growing up and got my sense of large international effects actually have local family effects, probably turned me into an economist. And that all got straightened out eventually with Volcker and 79 and the Plaza Court in 85. And Charlie got straightened out too and he was president of the American Economic Association and gave his famous presidential address in 1985. So I follow the vicissitudes of the dollar here as well. And I guess that's important for an INED audience to appreciate that there's a, just as I said, there's a standard account of who Kindleberger is, which is sort of not as complex or doesn't get him right, really, which I'm trying to fix. There's also kind of a standard account of the rise of the dollar system, which I also am trying to revise by looking at it through the lens of Kindleberger, who had adopted this particular approach to monetary theory called the key currency approach, which was particularly advocated by John H. Williams from Harvard, who he worked under at the New York Fed. That's sort of how he got to know it, also through his friend, Emil de Prey, who he worked alongside of. And from that point of view, the Bretton Woods is not so important. From that point of view, the international system is formed really by practice, by business practice, by banking practice. And it was already emerging dollar system in the interwar period. And in fact, there was a very important, so the key events in that revisionist history of the international monetary system sort of begin with 1931, when the Bank of England took Sterling off gold. Basically, they were forced to. This was not a crime. This was a tragedy. And the idea was, well, maybe other central banks can step in. Maybe the new Fed, the Fed remember, was only established in 1913. So it's an adolescent. It's not really ready to do this. It tries. It says we'll do this. So they have this big conference in 1933, the World Economic Conference in London, where the central bankers are trying to get together and put this international monetary system back together. Again, cooperation between the Fed and the Bank of England. But the politicians say no way. And in particular, Roosevelt says no way. We're going to take the dollar off gold, and we're going to go it alone. We need to not have responsibility for the rest of the world. We have our own problems here in the Depression. And so that was tanked in 1933. There was another effort after it looked like the US was coming out of the Depression a little bit. In 1936, there's this so-called tripartite agreement. Many students of the history of international monetary system don't even really know these dates, because they think that everything starts at Bretton Woods. And so there was an attempt to stabilize. And the New York Fed was the operational location of that for the United States. And that was Charlie's first job. That was Kindleberger's first job was being sort of staff support for that operation. And so naturally, he adopts this sort of way of thinking about the world. It's his job, his first job after his PhD. And it's stabilizing the dollar against sterling. And the franc is included there as well. But it doesn't really work for very long because of World War II. So from this point of view, what Bretton Woods was doing was really just recognizing the emerging system that had been emerging in the Etowar period that normal people didn't really know about, didn't really remember. And remember, there is no central bankers at Bretton Woods. It's almost even an anti-banker kind of coalition of finance ministers. But the war isn't over. D-Day has just happened. Charlie's not there. Why? Because he's fighting the war. He's actually, after D-Day, he went to the continent and was a right-hand man to General Bradley. And so I tell that story in the book. And then when he came back, he was right-hand man to General Marshall in creating the Marshall plan in the State Department. So he had a big career in saving the world, I guess you could say, before there was, before he was ever an academic. And so that's the story that I tell. Why did he want the dollar system? I don't know what he, let's be a little clear here, what he wanted, first of all. I think he did. I suggest this in the book that he was inspired by his professor at Columbia, H. Parker Willis, who had been one of the founders of the Federal Reserve System. And that was a big political effort to knit the United States into a unified monetary system by creating a central bank in 1913, the Federal Reserve Act. And so he was a favorite student, I think, of Willis in the 30s. And he conceived of this idea that the logic of unifying the monetary system within a country really is a general logic, and it should apply to the world economy as well. And so he thought that was a good idea. And just as the United States, he thought this was something that the economic efficiency of all of this would lead sort of normal decentralized forces to kind of push in this direction so that if you were to help it along with a little policy influence, this was an open door in a way that you could try to achieve. So it's not so much that he wanted it, although he did want it, because he thought it would be efficient, that it's better for the world. He thought it was going to happen and that he was on the side of history in advocating for this. The problem is that that view of the natural, or he would last, he would later say, the optimal currency area is the world, is not a natural view for a politician or a political scientist who view themselves as creatures of the nation state. And they're responsible for the nation state. I've already said how Roosevelt tanked and Nixon in 71. So the politicians are thinking are not interested in this cosmopolitan vision of a world order. And even conceivably a world government. So we don't have world governments. We just have national governments. And that is an obstacle, the main obstacle as he came to think for creating this. That's why the title is Money and Empire. It's really about economics and politics. It's about the optimal currency area, which is the globe, and the optimal political area, which is much smaller and optimal social area. And that's the dialectic, really, that is driving this dynamic over his lifetime as you're trying to renegotiate the boundaries between the economic and the political. In the post-World War II period, economists sort of emerged as advisors to the prince, as advisors to government. And in fact, MIT was a big center of this, that we have these new theories, new Keynesian theories of business cycle management, fiscal policy, monetary policy. Just listen to us. And Kennedy, President Kennedy, was an eager recipient of this. But this is go-it-alone Americanism. And Charlie was not interested in that, as I say. But all the economists were. And in particular, several of his most important nemeses, which I talk about in the book. One was Robert Triffin, who had the idea that there was something very unnatural about having the US dollar as the world currency. That he had this idea that somehow at Bretton Woods, the IMF had been intended to be the global central bank. And so really, the liabilities of the IMF should be the global reserve. And somehow he had in his mind that the United States subverted that through a work of political will, that the US prevented this wonderful world central bank from coming into being. As I say, nothing could be further from the truth from a key currency point of view. And certainly there were no central bankers at Bretton Woods. But neither was Triffin. And he was Belgian. Anyway, but he was at the New York Fed and was a naturalized American citizen. And he became a hero of the people who objected to the dominance of the United States, including the global south, but also Europe that was objecting to this. Because, of course, the US was rising and Europe was relatively falling. So he got a lot of media coverage and was a champion of killing the dollar system. And Charlie thought that was really not a good contribution of an economist. So chapter six is sort of about that. And then the other economists, pretty much all economists, but I focus on Harry Johnson in chapter seven, got the idea, like in order for the US to have more flexibility in its own monetary policy, we need a flexible exchange rate system. Not a fixed exchange rate system. The fixed exchange rate system was creating too much discipline. And so we need to get rid of it. And so the economists, in fact, were already urging government to move to flexible exchanges than Nixon said, OK, I'll do it. So this crime of 1971, economists were accessories to this crime. And this was a great tragedy, according to Kindleberger. And not only that, he was very worried in 1971 that it could be a repeat of 1931. Remember, Britain was forced off gold, and the consequence was global depression. US was not forced off gold. It just abdicated, OK, irresponsibly abdicated. And this was a big shock for him. And he was very worried that there would be a return to global depression. And I think surprised that that's not what happened, OK? So that forced him to rethink. That did not make him think at all that Triffin was right or that Harry Johnson was right. It meant that he had underestimated the resilience of the dollar system. Nixon tried to kill it, but the bankers wouldn't let him. They went on anyway. The dollar system continued to grow. In fact, it moved offshore to London, which had experience with this sort of thing because of the sterling system before 31. So the bankers made it go. And this is the invention, really, of the euro-dollar system and the offshore. It was a rocky time because you had to develop new kinds of exchange rate systems and forward markets and so forth that were unnecessary under Britain and Britain Woods. So it was a rocky time. And there was international monetary disorder. So Kindleberger believed, by the way, that in order to get any sustained inflation or deflation, price movement, level of price movement, you need international monetary disorder. So now he's comparing the Depression in the 70s and saying in the 30s, international monetary disorder led to deflation that was operating through the exchange rates, through competitive devaluation and so forth. And in the 70s, it was the reverse. It led to inflation. But it was international monetary disorder in both cases that was the facilitating factor. And so when Volcker came in in 79, the most important thing to understand about Volcker is not that he whipped inflation in the United States, but that he put the dollar back at the apex of the global dollar system and stabilized exchange rates with Plaza Accord in 1985. That's what killed the inflation. And in Kindleberger's point of view, and by the way, there's an implication for today because everyone's worried about inflation after COVID and so forth. And I've had these conversations with people at the BIS. I say, as long as the international monetary system holds, it seems to me we're not going to get any sustained inflation, that the analogy with the 70s is not correct. And now, and I've been saying that since the beginning of this, just channeling Charlie, and saying, that's what he would say. And so let me try that out and see. And it seems like maybe it's right. It's starting to look more right than it did a year ago when everyone was saying the sky is falling. And Powell is explicitly analogizing himself to Volcker. However, he's not waiting for the system to fall apart before he comes in. He's coming in much earlier after the COVID shock. And these other shocks, the Ukraine shock, the other shocks, the world system is absorbing a lot of shocks. And so what is remarkable to me, and I think is what Kindleberger would be remarking, is how so far the international monetary system seems to be holding. Seems to be holding pretty well. And in his view, that's sort of the sine qua non. Like if that falls apart, everything falls apart. If that holds on, then you have a chance. And so that's what he would be watching today. The period in which he was really active was a period when the dollar system, the problem, the central problem for the expanding dollar system, was sort of integrating Europe with the United States. That was a long, slow process because of World War II. Europe had been really destroyed, and the US had not. And so it wasn't really until 1958 that the European currencies became even convertible, much less really integrated. And so that was a rocky time in the early 70s. And the dollar swaps at the BIS were helpful in trying to stabilize these currencies. It wasn't at all clear what the right currency arrangement was. So there was a rocky time there. And that's what led people to think, well, the problem is the dollar. Whereas, in fact, it's not. It's the expansion of the dollar system that is having birthing pains here. That's how he understood that. And I think similarly, in my lifetime more, we've then seen the expansion to Asia, the integration of Japan and the tigers. And we've seen financial crises there that are consolidating that integration. And since the pandemic, we've really seen expansion of the global south. Pretty much all of the total dollar credit expansion since the global financial crisis has been in the global south, and that is now being consolidated. That means tested. That means crises. So there's going to be rocky times ahead. But the way Charlie would have understood that is these are the birthing pains of the global dollar system. And so it moves in this seesaw fashion, two steps forward, one step back. Some of that is about this relationship between economics and politics. As it becomes larger, it moves toward efficiency. But then there's a political reaction to it, that we were against globalization. We won independence. The truth of the matter, he would say, and he said this a long, long time ago, is that there's only one monetary policy. There's only one world money market. There's only one world capital market. They're all integrated. There's only one monetary policy that matters, and that's dollar. So the US monetary policy is global monetary policy. And other central banks can sort of choose a spread away from the interest rates set in the US. And that is a way to manage your balance payments, which is important because the balance of payments is the settlement constraint that is faced. And it's a particularly binding settlement straight for the global south because they don't have as much access to global capital markets for buffering this with borrowing and lending. That's what's so fascinating. After World War II, he followed his mentor, Hansen, in really believing in the secular stagnation hypothesis, thinking that the north is sort of washed up. Yes, there's going to be a post-war restocking boom, and we've got to rebuild Europe. But an engine of growth for the future requires development of the global south, and that requires capital flows to the global south. So the important international institution is not the IMF. It's the World Bank for long-term development and using that to prime the pump and to get started for private capital flows. So he would have looked at the post-COVID, I'm sorry, post-global financial crisis, expansion of dollar credit to the global south as like a complete vindication. Like that's what we needed 50 years ago. Come on, it's taken a long time. But the logic, the economic logic of it, has played out, as he saw it. His timing wasn't right because I think he didn't, he was too much of an economist and didn't appreciate the social and political challenges here to getting this going. So I think he would be happy about that and happy about that for the human race, for that that's a good thing for people. It doesn't matter so much, his own reputation. He was not that sort of a person. He was curious about the world. His ego was always in, here's this new thing, how can I understand it?