DOCSLIB.ORG

Reform of the International Monetary System and New Global Economic Governance: How the EU May Contribute Brussels, 6 June

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Reform of the International Monetary System and New Global Economic Governance: How the EU May Contribute Brussels, 6 June Robert Triffin International Robert Triffin International Association - RTI Reform of the International Monetary System and new global economic governance: how the EU may contribute Brussels, 6 June 2017, Jean Monnet Network kick-off event and Triffin Annual Lecture 2017 International Monetary Issues n°3 Reform of the International Monetary System and new global economic governance: how the EU may contribute Brussels, 6 June 2017, Jean Monnet Network kick-off event and Triffin Annual Lecture 2017 The kick-off meeting of the Jean Monnet Network on “Crisis-Equity-Democracy for europe and latin america” was supported – in addition to the Eramus+ programme of the EU – by the Robert Triffin International Association, the Gutt Fund, the Caisse des Dépôts et Consignation, the Royal Egmont Institute and IRELAC. Fonds Robert Triffin Camille International Gutt The co-financing of the Jean Monnet Network on “Crisis-Equity-Democracy for Europe and Latin America” by the European Union in the Framework of its ERASMUS+ programme does not involve any responsibility of the European Commission as regards the content of this publication and its use, which remain of the exclusive responsibility of the authors of the researches and their publications. © 2018 Versant Sud Boulevard Général Jacques, 20 B-1050 Bruxelles [email protected] www.versant-sud.com All rights reserved No part of this publication may be copied, entered into any databank or published in any form whatsoever, whether electronic, mechanical, by photocopy, photography or any other medium, without the prior written approval of the publisher. Graphics and Layout: Sébastien Vellut / lautobus.be ISBN: 978-2-930938-00-4 Legal deposit: D/2018/9445/9 Robert Triffin International Association - RTI Reform of the International Monetary System and new global economic governance: how the EU may contribute Brussels, 6 June 2017, Jean Monnet Network kick-off event and Triffin Annual Lecture 2017 Index Introduction 7 CHRISTIAN GHYMERS On behalf of the Jean Monnet Network The persistence of the Triffin dilemma today: A plan for overcoming it and ensuring a stable international financial architecture 11 CHRISTIAN GHYMERS RTI/UCL, and IRELAC, Belgium The New Global Economic Governance: Can Europe Help Win the Peace? 23 MARCO BUTI DG ECFIN, European Commission Reform of the International Monetary System and the IMF comments on Marco Buti’s presentation 41 STEPHANY GRIFFITH-JONES IRELAC & Columbia University Summing up of the Panel of 2017 Annual Triffin Lecture 47 BERNARD SNOY ET D’OPPUERS Chairman of Robert Triffin International Association – RTI/UCL Introduction Christian Ghymers On behalf of the Jean Monnet Network1 The Jean Monnet Network “Crisis-Equity-Democracy for Europe and Latin America” is a research project selected and financed at 80% by the European Commission and, the rest, by a consortium of five academic institutions from Europe and Latin America. These institutions are coordinated by IRELAC – the Interdisciplinary Institute for the Relations between European Union and Latin America and the Caribbean – based in Brussels. The project is organized as a network of bi-regional comparative research on crisis, its management and its social and democratic implications in Europe and Latin America with the aim to mutually learn from each other and to develop policy advice by offering a platform for an exchange of viewpoints to policy makers, academia and the civil society. Latin America and Europe can both learn from their respective experi- ences on crisis response and the distributive and democratic implications at national and regional levels. Democratic and distributive aspects of crisis response (monetary, financial & economic policies and institu- tional reforms) are key but they have not been adequately addressed in literature yet. Furthermore, opening a bi-regional dialogue in the field of socio-macroeconomic policies and crisis management would provide an additional strategic content to the Strategic Alliance that the Summits EU-CELAC are supposed to build. There is now a broad consensus among economists, political scientists and journalists about the nature of the EU crisis: it is not only an economic crisis, but a governance crisis coupled to a democracy crisis, and this is not only a European disease but a global one as the economic crisis is too. Latin 1. Research project co-financed by the Erasmus+ Programme of the European Union 7 America is also affected by the global nature of the crisis. Our Jean Monnet Network has the purpose to try to better identify the roots of this crisis by a comparative analysis between both regions. This ambitious goal requires as a first step to deal with the most global issue which affects both regions: the dysfunctions in the international monetary system, which could even be at the basis of the global crisis. Therefore, it was decided to start the project – the so-called kick-off meetings of our Network – with an international workshop and an international High-level Conference dedicated to focus on the asymmetric International Monetary System. For this purpose, the best partner is the Robert Triffin International association (RTI), which develops analysis along the lines initiated by Triffin sixty years ago about the dysfunctions of a system based mainly upon the US dollar, issuing massive spill overs upon global economy without either effective adjustment mechanism to correct global imbalances nor rational means to moderate or accelerate the growth of global liquidity. Based on this diagnosis, the exchanges of views examine how Europe could act through the present global governance to improve the situation. The present publication has been made possible thanks to the support of the Camille GUTT Funds, RTI, IRELAC and the (French) Caisse des Dépôts et Consignation (CDC). It points to present, first, the synthesis written by Christian Ghymers, co-coordinator of the Monnet Network, presenting the positions of the Robert Triffin International association – RTI, which were pre- sented and debated in the workshop analysing the major defect of the present International Monetary System. It was shown that the “Triffin dilemma” is still fully at work. Indeed, the use of a national currency, the US $, as the main international reserve currency introduces necessarily an asymmetry which feeds important spill overs on the world’s economy. This “built-in destabilizer” produces big liquidity waves with important side-effects on the monetary policies in the rest of the world, but also on the US federal reserve. The present difficulties of the global economy and the challenges that the Central Banks are facing with the effects of their quantitative easing measures and how to get out of them are also a result of the flaw of the IMS, which impedes a rational control of global liquidities. These positions were developed with a view to debate feasible solutions along the logical multilateral coherence of the main option, which consists in improving the Special Drawing Right – SDR by making of it a genuine multilateral currency allowing for a collegial control of global liquidities with a minimum of loss of national sovereignty. 8 The second part of the kick-off meetings was organized around the Annual Triffin’s lecture dedicated this year to analyse how significant Europe’s role has been in shaping the new global governance. This part is presented in three contributions. First, the key-note speech, delivered by Marco Buti, Director General, DG for Economic and Financial Affairs, European Commission, has demonstrated once more the continuing relevance of Robert Triffin’s ideas, and the renewed search for Global Economic Governance in the after- math of the 2008 economic and financial crisis and the rising role played by the Group of Twenty (G20). Second, Stephany Griffith Jones (IRELAC and Columbia University) intervened as discussant and presented her views on the need to ensure a more stable way to provide international reserves in a very Triffinian way by developing the use of the SDR. The last part of this publication is a summary written by Bernard Snoy, Chairman of RTI, of the exchanges in the panel of this 2017 Triffin Lecture. Upon these bases, the project will organize its successive researches and events in both regions in order to develop a bi-regional socio-economic research net- work, which could serve as a nucleus of a possible larger EU-CELAC academic network in the future and thus, promote bi-regional cooperation in this area. We are especially grateful to Viscount Etienne Davignon and Marc Otte, respectively President and Director General of the Royal EGMONT Institute, to Marco Buti from the European Commission, to the Erasmus+ Jean Monnet project, to Baron Michel Vanden Abeele, President of the GUTT Fund, to Baron Snoy et d’Oppuers, President of RTI and to Christophe Bourdillon from the CDC. 9 The persistence of the Triffin dilemma today: A plan for overcoming it and ensuring a stable international financial architecture Christian Ghymers RTI/UCL,2 and IRELAC3, Belgium The Triffin dilemma More than 50 years ago, the Belgian-American economist Robert Triffin (1911– 1993) denounced the dangerous incoherence of the “dollar system”, not the general peg-regime against the dollar created in Bretton Woods 1944, but more generally the use of a national currency as the main international reserve currency. His warning was coined the “Triffin dilemma” expressing merely that due to the inner logics of a currency to be a debt-at-sight, any system based mainly on the use of a national currency for supplying international reserve assets to the rest of the world, was doomed to conflicting objectives leading inevitably to generate global macroeconomic instability. The reason is the inescapable dilemma the issuer of this currency faces between either going ever deeper into debt in order to satisfy the growing world demand for liquidity, with the danger that this will undermine its creditworthiness on the one hand, or failing to satisfy this demand by giving priority to its creditworthiness exposing the world to a reserve shortage with a consequent conflictive deflation on the other hand.
Load more

Recommended publications
  • The European Payments Union and the Origins of Triffin's Regional Approach Towards International Monetary Integration
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Maes, Ivo; Pasotti, Ilaria Working Paper The European Payments Union and the origins of Triffin's regional approach towards international monetary integration NBB Working Paper, No. 301 Provided in Cooperation with: National Bank of Belgium, Brussels Suggested Citation: Maes, Ivo; Pasotti, Ilaria (2016) : The European Payments Union and the origins of Triffin's regional approach towards international monetary integration, NBB Working Paper, No. 301, National Bank of Belgium, Brussels This Version is available at: http://hdl.handle.net/10419/173757 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen
    [Show full text]
  • The International Monetary Crunch: Crisis Or Scandal? JANJOOST TEUNISSEN 359
    Alternatives Social Transformation and Humane Governance. Volume XI Number 3 July 1987 Contents On Humane Governance RAJNI KOTHARI 277 One True World or Many? A Gandhian Perspective RAMASHRAy Roy 291 Sexist and Racist Implications ofNew Reproductive Technologies MARIA MIES 323 Political Philosophy and Orientalism: The Classical Origins ofa Discourse SHIRAZ DOSSA 343 The International Monetary Crunch: Crisis or Scandal? JANJOOST TEUNISSEN 359 SPECIAL FEATURE A Statement Issued to Mark Human Rights Week and Pearl Harbor Day 397 Alternatives XII (1987), 359-395 The International Monetary Crunch: Crisis or Scandal? JAN JOOST TEUNISSEN* Today there is probably no ·other area of human concern that affects more deeply the living conditions of people allover the world than that of international finance. Nevertheless, the main policy-making in this field is in the hands of. an amazingly small group comprising central bankers and finance ministers in the rich countries, heads of international organizations such as the International Monetary Fund and big commercial bankers. The opinion of people outsid~ this charmed circle of financial managers is hardly ever taken into account. This is a pity, since economic policy-makers tend by both temperament and training to be rather narrow-minded; their thinking moves In a groove. Robert Triffin, an expert on international finance for ,nearly 50 years, and one of the interlocutors in the following narration, explained it in this way: 'Just as Clemenceau once said that war is much too serious a thing to be left to the gener'als, I think the economy is far too serious a thing to be left to the economists.' The truth of his statement is brought home when we look at the way Western financial authorities are handling the so-called international debt crisis.' In their view, most of the blame for this crisis must be laid on the developing countries.
    [Show full text]
  • The International Monetary System: Quo Vadis
    Columbia University Department of Economics Discussion Paper Series The International Monetary System: Quo Vadis Robert A. Mundell Discussion Paper #:0102-34 Department of Economics Columbia University New York, NY 10027 March 2002 The International Monetary System: Quo Vadis Robert Mundell Columbia University February 8, 2001 Manuel Guitian Memorial Lecture, International Monetary Fund, February 8, 2001 I. Manuel Guitian Manuel Guitian was one of two brilliant students I met in 1965 at the Graduate Institute of International Studies in Geneva. Both went on to the University of Chicago for the Ph.D. program and to great distinction as economists. The other student was Rudiger Dornbusch. My students at Geneva were required to write a research paper on international monetary economics. Manuel and I agreed that he should look into the Poincare-Rist stabilization of the franc in 1926. That got him interested in exchange rate theory and it was an interest that persisted throughout his life. The quality of his analysis of that important episode from the inter-war years convinced me that Manuel had a good future as an economist and I encouraged him to go to Chicago for his Ph.D. University of Chicago Economics in the late 1960s was in one of its golden periods, maybe comparable to Vienna in the 1880s or Harvard, Chicago or Cambridge in the 1930s. There were Frank Knight (emeritus), Earl Hamilton (emeritus), Milton Friedman, Theodore Schultz, Harry Johnson, George Stigler, Hiro Uzawa, Arnold Harberger, Merton Miller, Bert Hoselitz, Robert Fogel, D. Gale Johnson, Gary Becker, Robert Aliber, Arthur Laffer, Stanley Fischer, Herbert Grubel, and myself.
    [Show full text]
  • Nine Lives of Neoliberalism
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Plehwe, Dieter (Ed.); Slobodian, Quinn (Ed.); Mirowski, Philip (Ed.) Book — Published Version Nine Lives of Neoliberalism Provided in Cooperation with: WZB Berlin Social Science Center Suggested Citation: Plehwe, Dieter (Ed.); Slobodian, Quinn (Ed.); Mirowski, Philip (Ed.) (2020) : Nine Lives of Neoliberalism, ISBN 978-1-78873-255-0, Verso, London, New York, NY, https://www.versobooks.com/books/3075-nine-lives-of-neoliberalism This Version is available at: http://hdl.handle.net/10419/215796 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative
    [Show full text]
  • The European Payments Union and the Origins of Triffin’S Regional Approach Towards International Monetary Integration
    The European Payments Union and the origins of Triffin’s regional approach towards international monetary integration Working Paper Research by Ivo Maes and Ilaria Pasotti September 2016 No 301 Editor Jan Smets, Governor of the National Bank of Belgium Statement of purpose: The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. Orders For orders and information on subscriptions and reductions: National Bank of Belgium, Documentation - Publications service, boulevard de Berlaimont 14, 1000 Brussels Tel +32 2 221 20 33 - Fax +32 2 21 30 42 The Working Papers are available on the website of the Bank: http://www.nbb.be © National Bank of Belgium, Brussels All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. ISSN: 1375-680X (print) ISSN: 1784-2476 (online) NBB WORKING PAPER No. 301 – SEPTEMBER 2016 Abstract Robert Triffin (1911-1993) played an important role in the international monetary debates in the postwar period. He was known as one of the main advocates of a multipolar international monetary system. In this paper we analyse the origins of Triffin’s “regional” approach towards international monetary integration. We argue that Triffin’s experience with the European Payments Union (EPU) played hereby a crucial role.
    [Show full text]
  • The Pursuit of Reform
    Richard N Cooper Stephany Griffith-Jones PeterB. Kenen John Williamson and others The Pursuit of Reform Global Finance and the Developing Countries Edited by JanJoost Teunissen FONDAD, The Hague, November 1993 The Pursuit ofRefonn: Global Finance and the Developing Countries Proceedings of the Conference on the Functioning of the International Monetary System and Financing of Development, held at the Netherlands Ministry of Foreign Affairs in The Hague on 21-22 June 1993, organised by the Forum on Debt and Development. Editor: JanJoost Teunissen The views expressed in this book do not necessarily represent those of the Forum on Debt and Development. Summaries of the floor discussions following the papers attempt to convey the sense and substance of what was discussed. They have not been reviewed by the authors, the discussants, or the participants concerned. elF-DATA KONINKLI]KE BIBLIOTHEEK, DEN HAAG Pursuit The pursuit of reform: global finance and the developing countries / Richard N. Cooper ... [et al.] ; ed. Jan Joost Teunissen. - The Hague: FONDAD. - Ill.. Proceedings ofthe Conference on the functioning ofthe international monetary system and the financing of development, held at the Netherlands Ministry of Foreign Affairs in The Hague on 21-22 June 1993, organised by the Forum on Debt and Development ISBN 90-74208-03-7 Subject heading: capital market / monetary system / development cooperation Copyright: Forum on Debt and Development (FONDAD), 1993 Permission must be obtained from FONDAD prior to any further reprints, republications, photocopying, or other use of this work. The copyright of the paper by John Williamson is with the Institute for International Economics, Washington DC.
    [Show full text]
  • The Triffin Dilemma Again
    Discussion Paper No. 2009-46 | November 4, 2009 | http://www.economics-ejournal.org/economics/discussionpapers/2009-46 The Triffin Dilemma Again Edoardo Campanella World Trade Organization, Geneva Please cite the corresponding journal article: http://www.economics-ejournal.org/economics/journalarticles/2010-25 Abstract Tiny changes in the American monetary policy can have dramatic effects on the rest of the world because of its double role of national and international currency. This is what I call the Triffin dilemma, an ever green concept in international finance. In the paper I show how it works through three examples: price of commodities, dollarization, and the international financial position of the US. I argue that to solve this situation, it would be important to create a more democratic monetary system, in which all the countries have a decision weight. In particular, I think that globalization and regionalization should be the two forces leading towards the new monetary system. The main economies should adopt the same currency through a system of fixed exchange rates (global money); developing countries should create regional monetary unions (regional money), preserving the real exchange rate as real shock absorber, but gaining in terms of time consistency and credibility. Submitted as Policy Paper JEL: F33 Keywords: Triffin dilemma; global currency; regional monetary union; dollarization Correspondence Edoardo Campanella, World Trade Organisation, 154, rue de Lausanne, 1211 Geneva, Switzerland; e-mail: [email protected]. The author wrote this paper when he was studying at Barcelona Graduate School of Economics. He is very grateful to Broner, Ventura and Voth for useful suggestions. The opinions expressed in this paper should be attributed to the author.
    [Show full text]
  • The World Crisis and the International Monetary System: Revisiting the Triffin’S Dilemma?
    The World Crisis and the International Monetary System: Revisiting the Triffin’s Dilemma? WIIW Seminar Series WIIW/JVI Joint Seminar April 12, 2010 Christian Ghymers Visiting Scholar at JVI Senior Adviser DG ECFIN/EC What is the purpose? Global crisis commonly attributed to some “systemic aspects” of the market economy Mainly pointing to the financial sector and its lack of adequate regulation => subprime & excess of credit leverage => boom/bust Some minority views accuse either the Fed to have inflated too much (J. Taylor) or the so-called “International Monetary System” for having developed persistent macroeconomic disequilibrium with spillovers from national policies The purpose and scope of this presentation => to raise basic systemic aspects of international payments => to characterize the resulting architecture => to identify the failures => opening the debate about reforms The amazing fact: IMS is not really questioned Amazingly the IMS aspects do not seem anymore a key- aspect of the debates G-20 and economist forum focus mostly upon financial regulation, and exchange-rate undervaluation of the Chinese currency (including the Chinese worries for their gigantic-strategic $ reserve) Difficult to understand from a methodological point of view why the economist community overlooks the IMS weaknesses and its possible link with monetary excesses as a cause of the crisis (and doing so for 5 decades!) If this thesis is right => more catastrophic crisis in the pipeline Overview 1) What is International Monetary System (IMS) ? 2) Were the IMS basic functions respected? 3) The basic logics of IMS 4) The “Bretton Woods I” system, and its 3 defects 5) The “floating dollar-standard” and its conditions 6) The move to a managed float under $ standard 7) The “Bretton Woods 2” system and the monetary wave before the crisis 8) The present global monetary wave: Bretton Woods 3 9) Proposals for reform? 1.
    [Show full text]
  • Oecd Development Centre
    OECD DEVELOPMENT CENTRE Working Paper No. 162 (Formerly Technical Paper No. 162) FINANCIAL CRISES AND INTERNATIONAL ARCHITECTURE: A “EUROCENTRIC” PERSPECTIVE by Jorge Braga de Macedo Research programme on: Globalisation and Governance August 2000 CD/DOC(2000)6 TABLE OF CONTENTS PREFACE ................................................................................................................ 5 RÉSUMÉ .................................................................................................................. 6 SUMMARY ............................................................................................................... 7 I. INTRODUCTION............................................................................................... 8 II. THE “EUROCENTRIC” PERSPECTIVE DEFINED .......................................... 10 III. LESSONS FROM THE EMS............................................................................. 13 IV. FINANCIAL CRISES IN EMERGING MARKETS.............................................. 19 V. INTERNATIONAL FINANCIAL ARCHITECTURE ............................................. 24 VI. CONCLUSION .................................................................................................. 27 NOTES ..................................................................................................................... 28 BIBLIOGRAPHY ...................................................................................................... 32 OTHER TITLES IN THE SERIES/AUTRES TITRES DANS LA SÉRIE ..................
    [Show full text]
  • BIS Working Paper No. 684: “Triffin: Dilemma Or Myth?”
    BIS Working Papers No 684 Triffin: dilemma or myth? by Michael D Bordo and Robert N McCauley Monetary and Economic Department December 2017 JEL classification: F32, F33, F34, F41, H63. Keywords: Triffin dilemma, Foreign exchange reserves, Gold, US current account, Safe assets, World’s banker. BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1020-0959 (print) ISSN 1682-7678 (online) Triffin: dilemma or myth? Michael D Bordo and Robert N McCauley1 Abstract Triffin gained enormous influence by reviving the interwar story that gold scarcity threatened deflation. In particular, he held that central banks needed to accumulate claims on the United States to back money growth. But the claims would eventually surpass the US gold stock and then central banks would inevitably stage a run on it. He feared that the resulting high US interest rates would cause global deflation. However, we show that the US gold position after WWII was no worse than the UK position in 1900. Yet it took WWI to break sterling’s gold link. And better and feasible US policies could have kept Bretton Woods going.
    [Show full text]
  • Overcoming the Triffin Dilemma Today: a Plan for a Stable International Financial Architecture Christian Ghymers, RTI/UCL,1 and IRELAC2, Belgium
    Overcoming the Triffin dilemma today: A plan for a stable international financial architecture Christian Ghymers, RTI/UCL,1 and IRELAC2, Belgium The Triffin dilemma More than 50 years ago, the Belgian-American economist Robert Triffin (1911– 1993) denounced the dangerous incoherence of the “dollar system”, not the general peg-regime against the dollar created in Bretton Woods 1944, but more generally the use of a national currency as the main international reserve currency. His warning was coined the “Triffin dilemma” expressing merely that due to the inner logics of a currency to be a debt-at-sight, any system based mainly on the use of a national currency for supplying international reserve assets to the rest of the world, was doomed to conflicting objectives leading inevitably to generate global macroeconomic instability. The reason is the inescapable dilemma the issuer of this currency faces between either going ever deeper into debt in order to satisfy the growing world demand for liquidity, with the danger that this will undermine its creditworthiness on the one hand, or failing to satisfy this demand by giving priority to its creditworthiness exposing the world to a reserve shortage with a consequent conflictive deflation on the other hand. The essential message Triffin tirelessly sent to economists and policymakers is that once a national currency is used as foreign reserve by many other countries, asymmetries are resulting that create biases in the policy-mix of the issuer of reserves not only by exempting it from external monetary discipline, but also by provoking significant spillovers on global liquidity conditions, which tend to become suboptimal and unmanageable.
    [Show full text]
  • International Monetary Policies
    POSTWAR ECONOMIC STUDIES No. 7, September 1947 INTERNATIONAL MONETARY POLICIES LLOYD A. METZLER ROBERT TRIFFIN GOTTFRIED HABERLER BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Published October 1947 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CONTENTS PAGE PREFACE Inside Front Cover EXCHANGE RATES AND THE INTERNATIONAL MONETARY FUND LLOYD A. METZLER 1 Methods of Setting Exchange Rates 1 Exchange Rates after the First World War 1 Exchange Rates after the Second World W7ar 3 Movements of Currency Values since 1937 5 General Survey 5 The Countries Occupied by Germany 7 The Prewar Sterling Area 9 The Latin American Countries 11 Summary of Exchange Rate Movements 14 Exchange Rates and Prices 16 The Purchasing Power Parity Theory 16 Criticisms of Purchasing Power Parity 18 Parity Rates in Peace and in War 22 Parity Rates Based upon Wholesale and Retail Prices 24 Multilateral and Bilateral Comparisons 28 The Policy of the International Monetary Fund 30 Alternatives Which Faced the Fund 30 Reasons for Accepting Current Rates 31 Dangers of Postponing Action 36 The "Undervalued'' Currencies 38 Conclusions 42 Appendix Tables 44 NATIONAL CENTRAL BANKING AND THE INTERNATIONAL ECONOMY ROBERT TRIPFIN 46 Central Banking and the Gold Standard 48 The Correction of International Disequilibria 55 Cyclical vs. Fundamental Maladjustments 55 Gold Standard or Sterling Exchange Standard? 58 A Positive Policy for the International Monetary Fund 63 Anti-cyclical Monetary Policies 63 Fundamental Readjustments 75 Conclusion 79 iii Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St.
    [Show full text]