The Antagonists: Kindleberger, Friedman, and the Doctrinal Foundations of the International Monetary System

Abstract: Charles Kindleberger has recently been singled-out as having envisioned the present international monetary system in which the U.S. dollar is the dominant global currency and the Federal Reserve plays the role of global lender-of-last resort, providing dollar liquidity to other central banks through swap transactions during crises. I compare Kindleberger’s views on exchange-rate systems with those of Milton Friedman during the 1950s and 1960s. I show that the revisionist interpretation of Kindleberger’s view is on the mark only up to a point. It overlooks Kindleberger’s positions that were not borne out. Moreover, it should make some room for Friedman, who foresaw the breakdown of the Bretton Woods system and the move to flexible exchange rates by the industrial countries. Friedman also predicted that the dollar would remain the main global currency but, in contrast to Kindleberger, foresaw that it would do so under a regime of flexible exchange rates.

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