Floating exchange rates created the risk exposure that currency futures were designed to hedge

Evidence

As Friedman was preparing his paper, desperate efforts were being made at government level to reconstruct a system of fixed exchange rates, but it was already clear that even if that was successful the allowable bands of fluctuation would be wider than 1 percent permitted under Bretton Woods. Those involved in foreign trade would, therefore, be exposed to far greater risks of currency fluctuation than they had been in the 1950s and the 1960s. Bringing hedgers and speculators together in a currency futures market would make that market large and liquid, making it possible “to hedge at low costs and at market prices that move only gradually and are not significantly affected by even large commercial transactions” (Friedman 1971, p. — Donald MacKenzie, An Engine, Not a Camera, 656

Categorization

• XREF: connects to: Fixed exchange rates eliminate both hedging demand and speculation rationale for currency futures — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 645; Floating exchange rates preconditioned the rapid liberalization of global capital — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 448; Derivatives evolved from risk-hedging tools into a dominant speculative asset class — Max Haiven, Cultures of Financialization, 135 (+3 more)

Broader Connections

• Floating exchange rates preconditioned the rapid liberalization of global capital #expands (0.85) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 448
• Derivatives let investors tailor risk exposure precisely and have become tradable commodities themselves #expands (0.80) — Max Haiven, Cultures of Financialization, 478
• Derivatives evolved from risk-hedging tools into a dominant speculative asset class #qualifies (0.75) — Max Haiven, Cultures of Financialization, 135
• Derivatives do not reflect risk but actively produce contingencies and value #complicates (0.75) — Aris Komporozos-Athanasiou, Speculative Communities, 390
• Hedge funds now increase risk rather than hedging it as originally intended #exemplifies (0.72) — Andrew deWaard, Derivative Media, 142