Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

In the aftermath of World War II, the Bretton Woods monetary system had sought to restrict speculative capital flows. This gave the US Treasury and the Fed controlling roles. The aim was to minimize currency instability and to manage the global shortage of dollars. But it meant that the US authorities had to operate the kinds of controls that we now associate with China. This was a fetter on private banking. From the 1950s, with connivance of the UK authorities, the City of London developed as a financial center that sidestepped those constraints.18 British, American, European and then Asian banks too began to use London as a center for unregulated deposit taking and lending in dollars. Among the first to avail themselves of these “eurodollar” accounts were Communist states that wanted to keep their export earnings safe from meddling by the US Treasury. They set a trend. By the 1960s eurodollar accounts in London offered the basic framework for a largely unregulated global financial market.