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Lütkenhorst, Wilfried; Minte, Horst

Article — Digitized Version The petrodollars and the

Intereconomics

Suggested Citation: Lütkenhorst, Wilfried; Minte, Horst (1979) : The petrodollars and the world economy, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, Hamburg, Vol. 14, Iss. 2, pp. 84-89, http://dx.doi.org/10.1007/BF02930203

This Version is available at: http://hdl.handle.net/10419/139600

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The Petrodollars and the World Economy

by Wilfried LStkenhorst, Horst Minte, Bochum *

The quadrupling of the oil price by the OPEC in 1973 was a poignant event in the post-war develop- ment of the world economy. Which measures and mechanisms conduced to the international income redistribution 1 necessitated by the hoisting of the oil prices in the past five years?

he raising of the oil price by the OPEC was importing countries was unable to acquire the re- T anything but a "normal" modification of rela- sources for the additional transfers to the oil ex- tive prices of traded goods even if the political porting states through trade with third countries; and psychological side issues are left out of ac- from the OPEC states alone could these resources count. It could not be otherwise, so large and be obtained. On the other hand it was to be ex- abrupt was the change and so outstanding is the pected that the different conditions of individual quantitative importance of mineral oils in interna- importing countries in regard to dependence upon tional trade and their strategic significance for the OPEC oil, ability to export to the OPEC area and industrialization and processes attractiveness for petrodollar investments would of the oil importing countries. How then was it bring about major shifts inside the bloc of oil im- possible for the near-panic engendered by the ex- porting countries. pectation of continuing accumulation of foreign [] Secondly, the process of income redistribution holdings by the OPEC states to be su- was conceived to be a continuous one; unlike rep- perseded by wide-spread trust in the effectiveness aration payments for instance which are made of the mechanism and the once and not again, it posed special problems of ability of the international economic system to structural adjustment to a permanently worsened cope successfully with this problem? 2 distribution of trade gains (terms of trade), to al- tered cost structures and changes in national and The Petrodollar Problem sectoral export patterns.

In the OECD countries the petrodollar problem [] Thirdly, the transfer had been forced on the has often been discussed in the historic context industrialized states by developing countries, a fact which kept alive the hope that the OPEC of "classic transfer problems" such as occur in might collapse as the result of military or connection with war debts and reparations. The analysis therefore operated in similar categories 3 political action or simply through the working of There are however significant specific features of market forces, so that appropriate economic ad- justments could be avoided, while it created at the the petrodollar problem which must not be ig- same time much uncertainty about the likely con- nored: [] The first one is that all important trading na- 3 G. Tic h y, iOIkosten - ein Transferproblem (Oil costs - a transfer problem), in: Sparkasse, No. 2/1975, p. 29 ft., on the basis tions belong to one or other of two blocs facing of F. M a c h I u p, Das Transferproblem -- Thema und vier Varia- tionen (The transfer problem - theme and four variations), in: each other 4, with the result that the bloc of the oil ORDO 1963, p. 139 ff.; J. W e I c k e r, I~lschulden als Transfer- problem (Oil debts as a transfer problem), in: Konjunkturpolitik * Ruhr-Universit&t Bochum. 1975, p. 71 ff.; H. B. O h e n e r y, Restructuring the World Econ- omy, in: World Development, No. 10-12, 1975, p. 3ft.; W. L (J t- 1 According to Triffin this involved 1.8% of the GNP of the k e n h o r s t, H. M i n t e, Probleme des monet&ren und realen OECD states. This average applies also to the Federal Republic Transfers. Die Aufbringung und Verwendung tier Petrodollar of Germany; for the EC the redistribution amounted to 2.4%. (Problems of monetary and real transfer. The generation and (Quoted from Y. S. P a r k, Oil and the World Economy, utilization of petrodollars), in: M. T ietzel (ed.), Die Energie- Boulder, Colorado, 1976, p. 79.) krise: FSnf Jahre danach (The : Five years later), Bonn 1978, p. 37 ff. (English edition forthcoming). 2 Cf. "Die Katastrophe fand nicht statt" (The catastrophy did not take place), a euphemistic article dealing only with the outlook 4 The centrally planned economies and the quantitatively insig- for the well-performing industrialized countries, in: Die Zeit, Oc- nificant oil exporting countries outside the OPEC are disregarded tober 13, 1978, p. 18. in this simplifying bipartite view.

84 INTERECONOMICS, March/April 1979 RECYCLING duct of these states in the international commod- in view of the existing currency and risk 6 ity and financial markets. the OPEC states could not be interested in accu- mulating an unlimited amount of petrodollars, the Collection and Utilization of Petrodollars less so as the acquisition of real assets abroad, which would have done most to lessen the infla- The effectuation of the real transfer of petrodol- tion risk, tended to cause resistance in the recip- lars - and under comparative-static aspects this ient countries. alone is of interest - is in actual fact achieved through adjustment processes. The petrodollar Against a maximization of the adjustment velocity problem proper arises from the concrete reper- and, thus, the immediate effectuation of the real cussions of these processes on individual actors transfer operated the limitations on the internal and the need and means for their political control. absorptive capacity of the OPEC countries them- The internal collection of the petrodollars in the selves. These have been the subject of many dis- oil importing countries posed no problem in this cussions; in the early prognoses on the accumu- context inasmuch as - this was one effect of the lation of petrodollars they were greatly overrated. oil shock syndrome - neither subsequent pro- Bearing in mind the limited number of short-term ducers nor the final consumers offered any resis- investment opportunities and the lack of comple- tance to the additional costs being passed on to mentary production factors (human capital, infra- them. structure) in most OPEC countries, the case for short-term transformation of the petrodollars into In monetary terms the external provision of the imports seemed however unrealistic. petrodollars by the bloc of oil importing states was, likewise, relatively unproblematic inasmuch Immediate real transfers also faced serious ob- as the OPEC states had no choice but to accept stacles from the point of view of the oil importing payment in the of the importing states countries: in the first place it seems reasonable in settlement of their current account surpluses - to ascribe the limited absortive capacity of certain at least as long as they abstained from balancing OPEC countries in some part to the unavailability their current accounts by reducing exports, which of innovative supplies matching the specific needs was politically out of question. and factor equipment of the OPEC states and to the absence of appropriate marketing concepts in As the OPEC states would not however accept all the industrialized states. Moreover, the interpos- the currencies of the oil importing states but pay- ments in the international oil trade are for the ing of a transition period made it also easier for the oil importing states to establish new produc- most part made in US , many oil importing tion patterns on the supply side and mitigated the states had to turn to the international capital mar- need for domestic adjustments on the demand kets or draw on bi- or multilateral public credits to effect the necessary monetary transfers. Pro- side, for many of these states decided to reduce the cost pressure due to higher oil prices by a posals to introduce a basket of currencies as unit of account - as is regularly suggested whenever suitable . Had the OPEC states in the runs into a crisis - would leave the pre- this situation insisted on full-scale real transfers dominant position of the US-dollar unchanged. and used all their petrodollars for the purchase of goods, the already existing structural and supply- At the same time the OPEC states had to look for oriented inflationary impulses would have been profitable outlets for their financial assets, which reinforced by substantial impulses from the de- they could only find in the big capital markets of mand side 7. the oil importing states due to the dimensions of the sums involved. The end result was thus that The Transformations Process the OPEC states provided the financial resources which the deficitary importing states were in need In the situation five years after the oil crisis how- of in order to meet their monetary transfer obliga- ever the constraints of the adjustment process tions. But this recycling of petrodollars 5 could not have probably less influence on the size and utili- provide the perpetual motion for limitless deficit zation of current account surpluses by the OPEC financing because (1) every new cycle was bound states than the ideas of the economic and finan- to aggravate the asymmetry between petrodollar cial policymakers - who in many surplus coun- receiving and deficitary oil importing countries, tries constitute small oligarchical groups - about (2) the absorptive capacity of the private capital optimum arrangements for "their" portfolios. They markets which were the main support for the re- 6 Of interest is an estimate of the pecuniary losses due to the dollar depreciation: This loss is put at about $ 27 bn as $ 96 bn cycling process was shown to be limited, and (3) of the foreign assets were held in US currency wh ch at the end of 1977 had on y 72 % of its 1974 value (of., amongst others, - s Cf., in regard to the definition of petrodollars and petrodollar money, May 1978, p. 36). recycling, H. M i n t e, Petrodollar-Recycling und die Dritte Welt 7 Cf. H. A d e b a h r, Zwfschenphase zur BewSItigung der E~l- (Petrodollar recycling and the ), in: Problems der krise (Interim phase in the struggle against the oil crisis), in: Entwicklungsl~.nder, 1975, p. 315 f. WIRTSCHAFTSDiENST, 1975, p. 27 f.

INTERECONOMICS, March/April 1979 85 RECYCLING have to take decisions on the volume and pricing Table 1 of oil exports and thus on the desired level of oil Components of the Petrodollar Surplus revenues and their use for consumer goods, in- of the OPEC States in 1974-1977 vestment goods, financial investments at home (in US $ bn) and abroad, etc. The decision-making process in- volves ultimately the determination of the optimum 11974 !1975 11976 11977a Income from rate of transformation of a natural resource, crude Oil exports 102 97 118 131 oil, into consumer goods, the final objective of all Other merchandise exports 7 7 7 9 economic activities. This transformation process Services exports b 4 5 6 7 is taking place in several stages at each of which Foreign investments 4 6 5 8 there is a choice between several transformation Totalincome 117 115 136 158 alternatives with different economic and social Merchandise imports (fob) 36 59 68 85 profitability and risk values. The decisions, which Services imports b 15 23 30 35 in the theoretical optimization model have to be Totalimports 51 82 98 120 taken simultaneously, are diagrammatized here in Petrodollarsurplus 66 33 38 35 an easily understandable heuristic model in which a estimated; b including private transfers. several qualitatively important details are high- S o u r c e: Morgan Guaranty Trust, World Financial Markets, lighted. The component decisions emphasized in September 1976 and November 1977. the diagram are also indicative of the sequence observed in the following empirical analysis of the liable figures are as yet at hand but estimates sug- gest a further big drop to some $15 bne. The con- recycling process. traction of the surplus is mainly due to the fren- Declining Petrodollar Surpluses zied import boom, especially in 1975. A secondary factor was that, owing primarily to cyclical influ- How then have the current account surpluses of ences, the OPEC exports did not regain the 1973 the OPEC states developed in the years since the volume until 1976; in 1975 they declined even in oil crisis? value. Table 1 shows that the enormous surplus in 1974, It has to be pointed out however that calculations the year following the oil crisis, was exactly halv- concentrating on the aggregate petrodollar sur- ed in 1975 already. In the following two years the e Cf. Morgan Guaranty Trust, World Financial Markets, Dec. 1978, surplus underwent little change. For 1978 no re- p. 8.

The Decision-Making Process Relating to the Generation and Application of Petrodollars

O] 1 resol'vos -,~ rormation intoTIIOBO)" capita] (output and export quota) i I I Oil re~,emies

2. DecisionOIl the opt ill/Lira trallsformation el: oil _ [e~2e_m!e2 jet_ ~ ...... Real capital I Financial capital I l'olitic,] capital

f f 3. Decision on applica- 4. Decision on opti-~ 5. Decision on l)olitic:ll] tion to consuniption in klIl/ financial appl icat ions port fo I io /or illve s tl]/Cll\ t L / \ Inlportat ion hnportation Acqui"y \cquisition of Lending to l)evc 1 oi)]nent Ot}le 1 (licl: of holdings financial assets JnternatLona] , e,g. Of consklllior O~ invest- rail itary ~oods iilc n t ~oods of foreign - bank deposits institutions or regional or real assets - debentures on bilateral glohal

Intol'na 1 absol'pt J ol1 --~ I "~ I I i Petrodollar recycling in the wider sense

/ 10. I)ecision Oll the execution of the real transferJ

86 INTERECONOMICS, March/April 1979 RECYCLING plus of the OPEC countries are becoming increas- ulation of a variety of scenarios in the form of sen- ingly irrelevant: By 1977 the whole of the surplus sitivity analyses 9. They were therefore usually (except an insignificant amount from ) origi- either wrong or of little relevance thus illustrating nated from the four "low absorbers" in the Arab incidentally, the general conflict between truth peninsula - , , and the and empirical content in all extrapolation exer- . In view of the current ac- cises. count deficits of the other OPEC states, the "high Rising Absorption Rate absorbers", the aggregate OPEC surplus is there- fore a less than adequate indicator of the accu- As to the alternatives for the transformation of oil mulation of foreign currencies which is increas- revenue (see: component decision 2 in the dia- ingly concentrated on a small number of states. gram) the official statements of the OPEC states always adhered to a clear order of priorities, A comparison with the early petrodollar surplus namely: internal absorption (real capital) > devel- prognoses shows how greatly the real trend had opment aid (political capital) > recycling (finan- been generally overestimated. No matter which cial capital)lo, and the practical conduct of the index is being used to take account of inflation, OPEC states indeed confirmed the priority rank- the forecasts, which are reproduced here in con- ing of internal absorption. The rate of absorption, stant US dollars, are seen to be above the actually defined as the quotient of total imports and total achieved surpluses. foreign currency income, surged from 0.44 in 1974 Table 2 to 0.71 in 1975 and continued to rise at a more Early Prognoses of the Cumulative Petrodoilar sedate pace in the following years; in 1978 it was Surplus in 1974-1980 about 0.80. In other words, four-fifths of the OPEC (in constant 1974 dollars) oil revenues are by now absorbed internally !197411975 11976 r1977 j1978 11979 L1980 through importation of goods and services 11 World Bank There has been a great change in the sources of (July 1974) ...... 410 origin of the OPEC imports: World Bank (December 1974) ...... 308 Table 3 OECD (July 1974) ...... 250-300 Additional Exports to OPEC Countries as a Result Morgan Guaranty (January 1975) 80 137 191 231 248 235 179 of Market Share Changes compared with 1974 First Nat. City Bank (Period covered: 1975 and 1976) (June 1975) 66 102 139 169 188 196 189 Irving Trust Total Additional () 85 149 200 234 258 265 248 Exports I Additional Exports Levy to OPEC Exports (in % of (June 1975) 75 122 191 264 337 402 449 Countries (in US $ bn) Total (in US $ bn) Exports) Deutsche Bank (May 1975) 60 101 135 162 183 202 216 Advanced raw material countries 6.1 -- 0.1 -- 1.6 SchrSder (Prognos) (May 1975) 65 110 140 155 155 140 110 Developing countries 12.5 -- 3.3 -- 26.4 Actual figure at Industrialized countries 94.8 + 3.4 + 3.6 current prices 66 99 137 172 c. 187 Including: Fed. Rep. Germany 14.9 + 1.3 France 9.3 -- 0.1 Sources: H. Ben-Shahar, Oil: Prices and Capital, Lex- Great Britain 10.8 + 1.1 ington 1976, p. 122; Deutsche Bank, OPEC, Informationen und Analysen, September 1975; H. M i n t e, Petrodollar-Recycling Japan 17.5 -- 0.7 und die Dritte Welt, ibid., p. 318. USA 22.5 -Y 0.7

Source: M. J. M. Neumann., Zahlungsbilanzeffekte der Without raising objections to economically rele- Energiekrise, in: M. T i e t z e I (ed.), Die Energiekrise, ibid., vant macroprognoses in general it can be said p. 160. that in the particular case of the petrodollar prob- lem the international economic relations have Table 3 shows the additional exports to OPEC been upset so thoroughly as to overtax the fore- states of individual countries and groups of coun- casting capabilities of almost all the pundits. The tries as a result of shifts in market shares (1974 dilemma common to the many long-term progno- has been used as the basis year as the OPEC ses which have been undertaken was that they states set about restructuring their imports with had either to be based on bold assumptions about a time-lag of about one year). The crucial fact numerous variables (export demand, import de- revealed by this table is that the industrialized mand, prices, cyclical trend) or required the sim- countries have been able to increase their share of the OPEC markets further at the expense of 9 Cf., on the latter mode of procedure, H. B e n - S h a h a r, Oil: the developing countries. They are thus profiting Prices and Capital, Lexington 1976. 10 Cf. S. M. Y a s s u k o v i c h, Oil and Money Flows: The Prob- not only from the volume effect of rising OPEC lem of Recycling, issued by The Banker Research Unit, London imports but additionally from a structural effect 1975, p. 50. 11 Cf. the figures given in W. LL~tkenhorst, H. Minte, reflected by a rise of their market share. This Probleme des menet~.ren und realen Transfers, ibid., p. 56. structural effect probably results primarily from

INTERECONOMICS, March/April 1979 87 RECYCLING the sectoral composition of the OPEC imports. Table 5 Investment goods have become much more im- Ratio of the Volume of Merchandise Exports to portant in accordance with the industrialization and the Volume of Merchandise Imports from OPEC function of these imports. They account by now States in Selected Industrialized Countries for more than two-thirds of all imports. in 1972, 1974 and 1976

Since the OECD states supply over 80 % of all 1972 1974 1976 'I I I imports into OPEC states - the USA, Japan and Fa Germany 0.56 0.44 0.85 the Federal Republic of Germany attracted (in France 0.42 0.29 0.42 1975) 43 % of all OPEC import orders - it is not Great Britain 0.57 0.30 0.71 0.41 0.24 0.52 surprising that a few observers have already Japan 0.40 0.26 0.41 spoken of an actual dependence of the OPEC USA 0.97 0.40 0.46 states upon the largest industrial nations 12, the S e u r c e: Own calculations based on data in IMF, Directions more so as the financial recycling, as will be of Trade, 1970-1976. shown, is equally limited to a few investment alternatives which are regionally concentrated. while the exports from the Federal Republic to OPEC countries continued to advance slightly. FR Germany in Strong Competitive Position It is worth noting that the export-import ratio in The German exporters have achieved a substan- its trade with the OPEC has changed greatly in tially improved competitive position in the markets favour of the Federal Republic also in comparison of the OPEC states as was shown in Table 3. with the time before the oil crisis. More than one-third of the additional imports from industrialized countries due to charges in market Increasing Financial Diversification shares came from the Federal Republic. Its total The second leg of the OPEC's proclaimed invest- share of OPEC imports has risen so much com- ment priority scheme has been reversed in prac- pared with other EC and OECD countries that by tice. The public development aid rendered by 1977 one-third of all petrodollars spent in the EC OPEC states since the oil price hoisting amounts area and one-sixth of those spent in OECD coun- to less than 10 % of the cumulative petrodollar tries went to German export firms: surplus although Table 4 [] the transformation of oil revenues into political The Share of the FR Germany in the Total EC and capital through development aid is an efficient OECD Exports to OPEC States in 1973-1977 concept both economically (linkage of comple- (in %) mentary production structures, creation of larger markets) and politically (strategy of regional co- i 1973 J 1974 1975 ! 1976 i 1977 operation and bloc formation) 13, Share of Federal Republic [] the OPEC states have set up a large number in EC exports 28.2 30.3 30.3 32.2 33.6 of national and multinational funds for the sup- Share of Federal port of - in the main - Islamic developing coun- Republic in OECD exports 14.1 14.2 14.6 15.5 16.9 tries 14, S o u r c e : Own calculations based on data in OECD, Statistics of Foreign Trade, Series A, several volumes; IMF, Directions of [] the OPEC states spend a several times larger Trade, 1970-1976. portion of their GNP on development aid than do the DAC states ~s As a result of its strong export position the Fed- eral Republic recorded only a small deficit in its The lion's share of the petrodollar spending in the trade with the OPEC countries in 1976, and in narrow sense of the term has therefore gone into 1977 it earned for the first time a surplus; in the financial investments which according to the pro- first nine months of 1978 this surplus increased claimed political priorities were to have been only to about DM 4 bn as the German imports declined a residual item. The cumulative value of the for- eign assets of OPEC countries at the end of 1977 12 Cf., e.g., A. K. B h e t t a c h a r y a, The Myth of Petro-Power, Lexington 1977, p. 71 ff. was about $155-160 bn ~6 13 Cf. H. M inte, ErdSI und Entwicklung. Zur 13konomie und Politik der erdSlexportierenden L&nder (Oil and development. On A more detailed examination of their spread over the economics and policies of the oil exporting countries), Wen- various investment alternatives reveals that bank torf/Hamburg 1975, p. 185 ff., and Z. M i k d a s h i, Surplus Funds and the Strategy of Oil Exporting Countries, in: N. A. S h e r- deposits and treasury bills account for nearly two- b iny / M. A. Tessler (ed.), Arab Oil. Impact on the Arab Countries and Global Implications, New York 1976, p. 209 ff. thirds (64 c/o), notes and bonds for 15 % , stocks 14 Cf., e.g., A. A I k a z a z, Die multilaterale arabische Entwick- lungshilfe an die afrikanischen Staaten. Die Institutionen und ihre is Cf. W. L~tkenhorst, H. Minte, Probleme des mone- Leistungen (The multilateral Arab development aid to African t.~ren und realen Transfers, ibid., p. 67 ff. states. Institutions and their performances), in: Orient 3/1977, 16 Cf. Morgan Guaranty Trust, World Financial Markets, Novem- p. 115 ff. ber 1977, p. 10, and Euromoney, May 1978, p. 36.

88 INTERECONOMICS, March/April 1979 RECYCLING

and shares for6% , direct bilateral loans for8% for over 40 % of the recycling potential; more than and loans to international organizations (IMF oil three-quarters of all petrodollars in the narrow facility, World Bank) for 7 % . sense of the term were pumped back into oil im- porting countries through the private capital mar- The years since 1974 (when the investments were kets. still mostly short-term and concentrated in Great Britain and the USA) were marked by increasing This dominant role of the private capital markets diversification. has caused some observers to paint the future in sombre colours. Wilhelm Hankel for instance Table 6 presented some time ago the thesis that the wes- The Placing of Petrodollar Surpluses by Regions tern money and capital markets were doomed to in 1974-1977 collapse in the near future 19. His line of argument (in %) was this: As soon as the OPEC petrodollar over- 11974! 1975 I 1976 1 1977 hang has been removed, the oil states will be compelled to draw down their financial invest- Great Britain 36.8 12.1 12.6 12.2 Euromarket (26.3) (12.1) (17.9) (10.1) ments in order to finance their continuing indus- Other than Euromarket (10.5) (+ 0) (- 5.3) (2.1) trialization. The withdrawal of the OPEC states as US,~ 20.4 28.0 33.5 27.2 major creditors will hit the - at present favoured - Other countries 36.7 48.7 48.3 59.8 strong-currency countries most severely. To bal- International organizations 6.1 11.2 5.6 0.9 ance their capital accounts they will have to call Total 100.0 100.0 100.0 100.0 in the loans which they have given to deficit coun- S o u r c e : Own calculations based on data in Bank of England, Quarterly Bulletin, various issues. tries. And this will cause the pyramid of inter- state credits to collapse. The consequence could While in 1974 more than half of all surpluses were be a new economic crisis involving the entire invested in the USA or Great Britain, the share of world. these two countries had by 1977 fallen to less Such a scenario for disaster seems however ex- than two-fifths; close on 60% went into "other aggerated, and this for several reasons. First of countries", a rather heterogeneous category in- all, it is by no means certain that the petrodollar cluding other industrialized countries as well as surplus will soon be eliminated. It is quite possible developing countries. This item also includes that the importing countries will be hit by another Euromarket investments in centres outside Great hoisting of the oil price which some experts are Britain 17. It emerges from Table 6 that since 1975 already anticipating for the mid-eighties. Besides, Great Britain has been of interest as a place for the analysis of the policies of the OPEC states has investments only because of its Euromarket. In shown that they do not aim at maximizing the real 1976 the sterling accounts were actually drawn transfer; they value financial investments in the down quite substantially, which shows that the US and Euro-currency markets for their own sake OPEC s'~ates are much more sensitive to sterling as means of optimizing their portfolios. Further- fluctuations than to dollar fluctuations. more, it is not really clear why a withdrawal of petrodollars should cause the strong-currency Recent years also saw major changes in the time- countries to call in loans as, to go by past ex- scale of the petrodollar investments. The short- perience, they are the ones to profit primarily from term bank deposits and holdings of treasury bills the real transfer financed with withdrawn capital. fell off while the holdings of US Treasury bonds Above all, Hankel's argumentation leaves the and notes showed a striking increase from an in- intra-OPEC structure of the petrodollar holdings significant 0.4 % of the petrodollar surplus in out of account: While it is true that the majority 1974 to a little under 13% in 1977 18. The buying of of OPEC states have since 1976/77 again been stocks and shares followed a similiar course. At incurring current account deficits, others - like no time however did the latter reach the dimen- Saudi Arabia and the United Arab Emirates - will sions of a national "sell-out" of the industrialized in the medium-term future still be in substantial countries as had been feared in 1974. surplus so that an abrupt falling-off of their finan- cial investments need not be apprehended. Thus Is the International Financial System Doomed? already the trigger factor for the predicted finan- cial collapse does not exist. A study of the principal recycling channels at- tracting economic interest - bilateral arrange- 17 Cf., on the relative importance of various Euromarket centres, ments, capital transfer through multilateral insti- Y. S. Park, ibid., p. 89. 18 Own calculations based on figures in: Bank of England, Quar- tutions (IMF, World Bank), private national capital terly Bulletin of Statistics, various years. markets, private international capital markets - ]9 Cf. W. H a n k e I, Die Zukunft des intarnationalen W~.hrungs- systems (The future of the international monetary system), in: reveals the pre-eminence of the private capital WlRTSCHAFTSDIENST, March 1976, p. 137 ff., and the same author's book: Weltwirtschaft (The world economy), Desseldorf markets: The Euromarket was the "turn-table" 1977, p. 311 ff.

INTERECONOMICS, March/April 1979 89