Chapter 4 International bonds and the Bretton Woods era
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Chapter 3 begins to trace the postwar development of the international bond market as a way of exploring the history of the subprime crisis. Focusing on the period from 1945 to 1978, it shows that the abstract formulation of risk laid down by the Bretton Woods system supported demand for US debt precisely because these issues could be tied back to the credibility of the US state. The chapter looks at how the perceived risklessness of dollar assets produced growth in the Yankee bond market and created the conditions that allowed the Interest Equalization Tax to have such a dramatic effect on the placement of offshore issues in 1963. It also shows that demand for dollar debt drove the development of the European offshore bond market, even as Treasury bonds were far and away the most popular domestic-international placements. Moreover, the chapter demonstrates that policy decisions shaped the contours of the international bond market in a way that extended US risk power.

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