ROBERT SOLOMON, 92

Former Fed chief economist

 

Washington Post Service

Robert Solomon, a former chief international economist for the Federal Reserve Board who was a leader in efforts in the 1960s to salvage and reform the long-prevailing international monetary system that linked major global currencies to gold, died Sept. 6 at Holy Cross Hospital in Silver Spring, Md. He was 92.

The cause was complications from lung cancer, said his daughter, Carol Van Oudenaren.

Solomon, who participated in bombing missions over Japan as a navigator in World War II and later earned a doctorate in economics from Harvard University, rose through the hierarchy at the Federal Reserve from 1947 to 1976.

He became director of the Fed’s international finance division and an advisor to the board of governors. He was also vice chairman of the “Committee of 20” nations negotiating world monetary reform in the early 1970s. The gathering was a precursor to meetings of finance ministers and central bank governors known as the Group of 20.

The Bretton Woods system, established to foster economic stability post World War II, created the International Monetary Fund to supervise the exchange rate system. The system also used the U.S. dollar as the center of the international monetary system. Countries pegged their currencies to the dollar, which could be converted into gold at the fixed rate of $35 an ounce.

For years under this system, the United States played international banker to the world, but conflicts arose when European and Japanese economies dramatically improved. Countries built up their international reserves and exchanged them into gold with the U.S. Treasury, eventually causing the U.S. gold reserve to dwindle while the supply of dollars rose around the world. After years of tensions over inflation and balance-of-payments concerns, President Richard Nixon took the United States off gold in 1971.

In the years leading up to the rupture, Solomon was involved in international negotiations to preserve the Bretton Woods system. He favored reforms such as greater exchange-rate flexibility and greater responsibility on countries that have surpluses in trade either to reduce exports or increase imports.

Trying to reform the system was ultimately like “trying to put Humpty Dumpty back together again,” said Edwin “Ted” Truman, a senior fellow at the Peterson Institute for International Economics and a former ranking official at the Federal Reserve and Treasury Department. “No one was prepared to take on the responsibility for maintaining the system or give up their national sovereignty.”

In addition to his work on Bretton Woods, Solomon was among an elite group of economists and government officials who in the late 1960s helped conceive the concept of an artificial monetary asset called SDRs, or special drawing rights, as a means for countries to add to their reserves without running large surpluses.

Solomon was an architect of this new “paper gold” system. The International Monetary Fund issued SDRs to nations in proportion to their membership stakes in the global financial institution.

SDRs functioned as an “asset and as a credit facility,” Truman said. Member countries could use SDRs to settle trade deficits, for example, by transferring their SDRs to another government to obtain foreign exchange. The reform came too late to save Bretton Woods, but in 2009 the IMF issued $250 billion in SDRs in response to the global financial crisis.

Robert Solomon was born May 2, 1921, in New York. He served in the Army Air Forces in the Pacific during World War II, and his decorations included the Distinguished Flying Cross and the Air Medal.

He was a 1942 graduate of the University of Michigan. At Harvard, he received a master’s degree in 1947 and a doctorate in 1952.

His wife of 55 years, Fern Rice Solomon, died in 2001. Survivors include companion, Jean Braun; three daughters from his marriage, Carol Van Oudenaren, Barbara Solomon, and Anne Rutland; and seven grandchildren.

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