This document discusses the challenges of devising a stable international monetary system. It notes there are disagreements among economists about possible solutions to technical issues. Designing a system poses trade-offs between the desirable goals of fixed exchange rates, national independence in monetary policy, and capital mobility, as no system can accommodate all three. Some countries have prioritized independence over capital mobility by imposing capital controls. The document also notes debates over whether the Euro will replace the dollar as the dominant currency.
2. 1. Introduction
2. The postwar international monetary system
3. The end of fixed exchange rates
4. The financial revolution and monetary affairs
5. Embedded technical and political issues
6. Devising an international monetary system
7. Reform of international monetary affairs
8. Unity or Fragment of the monetary system
9. Fewer or Many national currencies
10.Conclusion
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10. There are intellectual and theoretical disagreements among
economists and public officials about many possible solutions to
the technical issues embedded in a monetary system.
The problem of devising a stable and politically acceptable
international monetary system is further compounded by the
inevitable trade-offs among the following equally desirable goals:
fixed ex- change rates, national independence in monetary policy,
and capital mobility.
Unfortunately, no international monetary and financial system can
accommodate all three of these desirable goals (fixed exchange
rates, national independence in monetary policy, and capital
mobility), al- though it can incorporate at most two of these
objectives.
Some countries, especially Malaysia and China, placed a high
value on macroeconomic independence and have imposed controls
on capital movements.
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13. - In Western Europe, they believe
that Euro will replace the dollar.
-American economist believe that
Euro will not replace the dollar.
- Slowly occur
- Give sufficient time to make
necessary adjustment and
eliminate its deficit.
Editor's Notes
Because international monetary system base on fixed but adjustable exchange rates was generally isolated from international finance and there was really no international financial system in that time.
An international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners.
That attempts to cure a country's balance of trade, inflation, and unemployment problems by practices that harm the economic interests of its trading partners. It usually takes the form of (1) restricting imports by quotas or by raising tariffs, (2) currency devaluation that makes imports more expensive and exports cheaper, or (3) currency appreciation that reduces domestic inflation but makes its products more expensive in the importing countries.
to provide monetary reserves sufficient to enable member governments to maintain the exchange rates for their currencies at predetermined value. Use contribution from member countries and to offer reserve credits to states with international payment problems and its policies to prevent global inflation or devaluation.
the 2 main actor are Vietnam war and the launching of great society program had cause the global rate of inflation to accelerate and to threaten the value of the dollar.
This would delink national economic one another and thus permit every government to pursue those economic policies best suited to its own national circumstances.
Minority of economists disagree with this optimistic assesment and was very concern about the potentially inflationnary and destabilizing consequences of delinking the international monetary system from the anchor of gold or some other commodity.
- Adjustment the ability to become more familiar with a new situation.
- Confidence ( If they lose confidence, other countries will shift the composition of their reserves. )
By this consequences, American policy maker believe that Dollarization would strengthen the Dollar against Euro.
