Paul van Zeeland and the First Decade of the US Federal Reserve System: the Analysis from a European Central Banker who was a Student of Kemmerer

Journal title HISTORY OF ECONOMIC THOUGHT AND POLICY
Author/s Ivo Maes, Rebeca Gomez Betancourt
Publishing Year 2019 Issue 2018/2
Language English Pages 27 P. 5-32 File size 290 KB
DOI 10.3280/SPE2018-002001
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

The establishment of a central bank occurred at very different moments in the process of economic integration in the United States and the European Union. In this paper, we go into the first years of the Federal Reserve System through the lens of Paul van Zeeland’s PhD dissertation. Paul van Zeeland (1893-1973) became the first Head of the Economics Service of the National Bank of Belgium in 1921, after his studies in Princeton with Edwin Walter Kemmerer. There are clear similarities in their analyses of the Federal Reserve System, for instance in their adherence to the gold standard and the real bills doctrine as well as in their emphasis on the elasticity of the money supply. Moreover, they shared a view - with hindsight a rather naïve view - that with the Fed in place, financial crises would be a distant memory. However, there were also important differences. So, van Zeeland, like several other economists as Warburg, accorded greater significance to the discount market (a key factor for the international role of the dollar) and to a stronger centralization of the Fed (which would be taken up in the 1935 Banking Act). Moreover, very specific for van Zeeland is the importance given to the Fed’s independence from the State (an element related to van Zeeland’s continental European background and Belgium’s experience of monetary financing during the war).

Keywords: Van Zeeland, Kemmerer, Federal Reserve System, financial crisis, banking reform

Jel codes: A11, B1, E58, F02, N23

  1. Almodovar A. and P. Teixeira (2008). The ascent and decline of catholic economic thought. History of Political Economy, 40: 62-87. Burgess W. R. (1927). The Reserve Banks and the Money Market, New York, Harper & Bros.
  2. Butzen P., S. Cheliout, and H. Geeroms (2014). Lessons from the US for the institutional design of EMU. NBB Economic Review, 2 (September): 82-101.
  3. Buyst, E., I. Maes, W. Pluym and M. Danneel (2005). The Bank, the Franc and the Euro, A History of the National Bank of Belgium, Tielt, Lannoo.
  4. Buyst, E. and I. Maes (2007). Monetary policy controversies and the creation of economics departments at central banks: the case of Belgium. In Asso F. and L. Fiorito (eds.), Economics and Institutions. Contributions from the History of Economic Thought, Milan, Franco Angeli: 143-162.
  5. Conant, C.A. (1910). The National Bank of Belgium, Washington, Government Printing Office. Conférence Financière Internationale (1920). Comptes Rendus de la Conférence, Tome I, Bruxelles, Dewarichet.
  6. Currie L. (1934). The Supply and Control of Money in the United States, Cambridge (Mass.), Harvard University Press.
  7. Dalgaard B.R. (1982). E.W. Kemmerer: the origins and impact of the money doctor’s monetary economics. Variations in Business and Economic History, 4: 31-43.
  8. Dimand R.W. (2003). Competing visions for the US monetary system, 1907-1913: The quest for an elastic currency and the rejection of Fisher’s compensated dollar rule for price stability. Cahiers d’Economie Politique, 45 (Automne): 101-137.
  9. Drake P.W. (1989). The Money Doctor in the Andes: the Kemmerer Missions, 1923-1933, Durham, Duke University Press.
  10. Dujardin V. and M. Dumoulin (1997). Paul van Zeeland. 1893-1973, Brussels, Editions Racine.
  11. Dumoulin M. and A.-M. Dutrieue (1993). La Ligue Européenne de Coopération Économique, 1946-1981: Un Groupe d’Étude et de Pression dans la Construction Européenne, Berne, Lang.
  12. Eichengreen B. (2011). Exorbitant Privilege: The Rise and Fall of the Dollar, Oxford, Oxford University Press.
  13. Eichengreen B., A. Mehl and L. Chiţu (2018). How Global Currencies Work. Past, Present and Future, Princeton, Princeton University Press.
  14. Eichengreen B., A. Mehl, L. Chiţu, and G. Richardson (2014). Mutual Assistance between Federal Reserve Banks, 1913-1960 as Prolegomena to the Target2 Debate, Working Paper 20267, National Bureau of Economic Research.
  15. Federal Reserve Board (1922). Federal Reserve Bulletin, Washington, Government Printing Office.
  16. Friedman M. and A. Schwartz (1963). A Monetary History of the United States, 1867-1960, Princeton, Princeton University Press.
  17. Gaspar V. (2015). The making of a continental financial system: lessons for Europe from early American history. Journal of European Integration, October: 847-859.
  18. Gomez Betancourt R. (2010a). Edwin Walter Kemmerer’s contribution to quantity theory of money. European Journal of the History of Economic Thought, 17(1): 115-140.
  19. Gomez Betancourt R. (2010b). Edwin Walter Kemmerer and the origins of the Federal Reserve System. Journal of the History of Economic Thought, 32(4): 445-470.
  20. Gomez Betancourt R. (2016). Kemmerer. In Faccarello G. and H.D. Kurz (eds.). Handbook of the History of Economic Analysis, Cheltenham, Edward Elgar, Vol. 1, Great Economists since Petty and Boisguilbert: 449-451.
  21. Gomez Betancourt R. and I. Maes (2017). How to become a monetary economist in a global world? The case of the Belgian Paul van Zeeland, Journées Charles Gide, Fabricating Modern Economics, mimeo.
  22. Goodhart C.A.E. (1969). The New York Money Market and the Finance of Trade, 1900-1913, Cambridge, Harvard University Press. Harris S.E. (1936). The commercial theory of credit. Journal of Political Economy, 44 (February): 94-105.
  23. Hawtrey R.G. (1924). The tenth annual report of the Federal Reserve Board. Economic Journal, 34(June): 283-286.
  24. Henau B. (1995). Paul van Zeeland en het monetaire, sociaal-economische en Europese beleid van België, 1920-1960, Brussels, Koninklijke Academie.
  25. Janssen A.-E. (1911). Les Conventions Monétaires, Paris-Brussels, Alcan-Larcier.
  26. Kauch, Pierre (1950). La Banque Nationale de Belgique 1850-1918, Brussels, National Bank of Belgium.
  27. Kemmerer E.W. (1910). Seasonal Variations in the Relative Demand for Money and Capital in the United States, Washington, Government printing office, National Monetary Commission, 61st Congress, 2nd session Senate. Document N. 588.
  28. Kemmerer E.W. (1911a). American banks in times of crisis under the National Banking System. Proceedings of the Academy of Political Science in the City of New York, 1 (2), The Reform of the Currency (January): 233-253.
  29. Kemmerer E.W. (1911b). Seasonal variations in the New York money market. The American Economic Review, 1(1): 33-49.
  30. Kemmerer E.W. (1913a). Why I am a Progressive. An address delivered by E. W. Kemmerer, at Princeton, N.J., May 22, 1913, in Edwin Walter Kemmerer’s Papers, 1875-1945.
  31. Seeley G. Mudd Manuscript Library. Department of Rare Books and Special Collections, Princeton University. Box XXI-A, b-7.
  32. Kemmerer E.W. [1918] (1920). The ABC of the Federal Reserve System: Why the Federal Reserve System was Called into Being, the Main Features of its Organization, and How it Works, Princeton, Princeton University Press, 1938, 12th edition.
  33. Kemmerer E.W. (1944). Gold and the Gold Standard, New York, Macmillan.
  34. Keynes J.M. (1936). The General Theory of Employment, Interest and Money, London, Macmillan.
  35. Laughlin J.L. (1933). The Federal Reserve Act, its Origin and Problems, New York, Macmillan.
  36. Maes I. (2002). Economic Thought and the Making of European Monetary Union, Forewords by G. Quaden and A.W. Coats, Cheltenham, Edward Elgar.
  37. Maes I. (2004). On the origins of the Franco-German EMU controversies. European Journal of Law and Economics, 17(1): 21-39.
  38. Maes I. (2010). A Century of Macroeconomic and Monetary Thought at the National Bank of Belgium, Brussels, National Bank of Belgium.
  39. Maes I. and E. Buyst (2005). Migration and americanization: the special case of Belgian economics. The European Journal of the History of Economic Thought, 12(1): 73-88.
  40. Mehrling P. (2002). Economist and the Fed: Beginnings. Journal of Economic Perspectives, 16(4): 207-218.
  41. Mehrling P. (1997). The Money Interest and the Public Interest: American Monetary Thought, 1920-1970, Cambridge (Mass.), Harvard University Press.
  42. Meltzer A.H. (2003). A History of the Federal Reserve, Vol. 1, 1913-1951, Chicago, Chicago University Press.
  43. Mints L.W. (1945). A History of Banking Theory, Chicago, University of Chicago Press.
  44. Rist C. (1938). Histoire des Doctrines Relatives au Crédit et à la Monnaie depuis John Law jusqu’à nos Jours, Paris, Librairie du Recueil Sirey.
  45. Robertson D.H. (1922). Money, London, Nisbet.
  46. Sayers R.S. (1976). The Bank of England. 1891-1944. Appendixes, Cambridge, Cambridge University Press.
  47. Sprague O.M.W. (1913). The organization of the Federal Reserve Banks, Proceedings of the Academy of Political Science, 4: 106-117. Steels J. (1926). La Banque à Succursales dans le Système Bancaire des États-Unis, Gand, Buyens.
  48. Timberlake R. (1978). The Origins of Central Banking in the United States, Cambridge, Harvard University Press.
  49. Toniolo G. (2005). Central Bank Cooperation at the Bank for International Settlements, 1930-1973, with the cooperation of Piet Clement, Cambridge, Cambridge University Press.
  50. Van der Wee H. and K. Tavernier (1975). La Banque Nationale de Belgique et l’Histoire Monétaire entre les Deux Guerres Mondiales, Brussels, BNB.
  51. van Zeeland P. (1921). Inflation et déflation. Box. N099 7, Archives à la Banque Nationale de Belgique. 15/12/1921.
  52. van Zeeland P. (1922). La Réforme Bancaire aux Etats-Unis d’Amérique de 1913 à 1921: Le Système de la Réserve Fédérale, introduction de E. W. Kemmerer, Bruxelles, Bruylant.
  53. van Zeeland P. (1922b). Quelques impressions des Etats-Unis. La Revue Générale, 108: 194-211.
  54. van Zeeland P. (1938). Report Presented by Monsieur van Zeeland to the Governments of the United Kingdom and France on the Possibility of Obtaining a General Reduction of the Obstacles to International Trade, London, H.M. Stationery.
  55. van Zeeland P. (1945). La Belgique et l’Occident Européen, Bruxelles, La Marais, 1946, 2nd edition.
  56. Warburg P. (1909). Central bank of United States. American Economic Association Quarterly, 3rd Series, 10 (1): 338-358.
  57. Warburg P. (1911a). Principles that must underlie monetary reform in the United States, Proceedings of the Academy of Political Science in the City of New York, 1 (2): The Reform of the Currency: 376-388.
  58. Warburg P. (1911b). The Reform of the Currency, edited by Henry R. Mussey, New York, Academy of Political Science.
  59. Warburg P. (1930). The Federal Reserve System. Its Origins and Growth, Reflections and Recollections, 2 Vols, New York, Macmillan.
  60. Wells D.R. (2004). The Federal Reserve System. A History, Jefferson, Mcfarland.
  61. White E.N. (2013). To establish a more effective supervision of banking. How the birth of the Fed altered bank supervision. In Bordo M. and W. Roberds (eds.). The Origins, History and Future of the Federal Reserve, Cambridge, Cambridge University Press: 7-54.
  62. Young A. (1926). Preface. In Steels J. La Banque à Succursales dans le Système Bancaire des États-Unis, Gand, Buyens.

  • Paul van Zeeland, a monetary economist between two worlds Rebeca Gomez Betancourt, Ivo Maes, in The European Journal of the History of Economic Thought /2021 pp.31
    DOI: 10.1080/09672567.2020.1746376

Ivo Maes, Rebeca Gomez Betancourt, Paul van Zeeland and the First Decade of the US Federal Reserve System: the Analysis from a European Central Banker who was a Student of Kemmerer in "HISTORY OF ECONOMIC THOUGHT AND POLICY" 2/2018, pp 5-32, DOI: 10.3280/SPE2018-002001