Courtesy Reuters

The Thrust of History in International Monetary Reform

Is our international monetary system heading toward a sudden collapse as in 1931, or toward the fundamental reforms needed to cure its most glaring and universally recognized shortcomings? Or will it continue to drift precariously from crisis to crisis, each one dealt with by belated rescue operations and the spread of restrictions and currency devaluations? Judging from past history, official statements and even intentions are unlikely to provide reliable answers to these questions, for they are more often designed to reassure than to enlighten. The Governor of the Bank of England, Sir Leslie O'Brien, candidly confessed to a Cambridge audience last spring: "I am rapidly qualifying as an instructor on how to exude confidence without positively lying." Another reason is that major changes in the international monetary system have rarely been the result of conscious planning. They have most often been the by-products of broad historical forces or accidents, defying contemporary forecasts and official intentions.

Official negotiations on international monetary reform were launched, five and a half years ago, with a confident agreement "that the underlying structure of the present monetary system-based on fixed exchange rates and the established price of gold-has proven its value as the foundation for present and future arrangements." (Statement issued on October 2, 1963, by the Secretary of the Treasury of the United States on Behalf of the "Group of Ten" Members of the Fund.)

The snail's pace of these negotiations, however, and the recurrent and snowballing gold and foreign-exchange crises of recent years have spread mounting doubts regarding these two pillars of the gold-exchange standard. The disbanding of the famed Gold Pool and the introduction of the so-called two-tier gold market in March 1968 were not the planned and deliberate outcome of the negotiations in process, but rather the defeat of fourteen years of efforts to preserve the $35 price in the private as well as in the official market. The optimists-like myself-still hope against hope that these decisions will prove the first, and constructive, steps toward a gradual elimination

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