A duopoly theory of government money production: The 1930s and 1940s

During the 1930s and 1940s, the Treasury and Fed possessed significant monetary powers. To explain the interaction of these agencies during this period, I develop a theory of money production which assumes each party is interested in increasing the seigniorage associated with their production. The theory implies that the two agencies will engage in specific forms of cooperation. An examination of monetary policy procedures in the 1930s and 1940s indicates that the cooperation view of the Fed and Treasury relationship has more explanatory power than traditional views.