The International Monetary system: history and characteristics

Résumé du document

The International Monetary System' is an expression indicating all the rules elaborated by the countries to ensure, thanks to currency, a stabilization of the exchanges, and indicating the whole of the institutions charged to control and organize the monetary exchanges between the countries. An international monetary collaboration is necessary, because of the nature of the international trade, which constitutes a richness for the nations, but also a potential source of monetary imbalances. Most of the countries opened on the world have some deficits or surpluses which cause variations of currency on the foreign exchange market, the value of their currency expressed in other currencies not only changes according to the commercial results, but also according to the phenomena of speculation. The bad aspect of the absence of rules, making it possible to organize the trade on a stable basis of rate of exchanges was never as obvious as during the time of discord between the nations. Against this danger, and with the need for supporting the exchanges of goods and services, the countries sought, in relation to the development of the international trade, to create a system of international payments guaranteeing the safety of the transactions.

Extraits

[...] The Europeans and Japanese also accepted US management because they needed US assistance to rebuild their domestic production, finance their international trade, and provide political stability (Marshall Plan). The US managed the international monetary system by: providing liquidity: gold production was insufficient; the dollar was the only strong currency to meet the rising demands for international liquidity. The strength of the US economy, the fixed relationship of the dollar to gold an ounce), and the commitment of the US government to convert dollars into gold at that price made the dollar as good as gold. [...]

[...] Gold and silver drove out traditional local currencies. National economies became increasingly interdependent and subordinate to the operations of the expanding international economic system 3. The Era of Political Money (18th and 19th centuries) Governments began to issue paper money, modern banking arose, and public and private credit instruments proliferated (This period is called the Financial Revolution) .Governments acquired control over the money supply and could influence the level of economic activity through the creation of money. The Financial Revolution solved the historic economic problem of the inadequacy of the money supply. [...]

[...] The United States, having returned to the gold standard already in 1919, were avid proponents of a quick return to gold. But Britain and France were not ready to advance with unilateral stabilization. The adoption of gold by Britain was delayed until April 1925, when Britain felt pressured to move, as other countries were contemplating a return to gold. Without Britain on gold, the adoption of gold as monetary anchor by other countries would have implied a further shift of gold reserves and deposits away from London and to New York. [...]

[...] A IMS like this one, existing with the currencies of these great zones will certainly remain to be reinvented, but the will of supremacy of a monetary power on the others could then be sublimated. Bibliography Books The wealth of open nations, Kurt Pederson and Erik Strojer Madsen, Mc Graw-Hill book compagny. The world economy: trade and finance, Beth V. Yarbrough and Robert M. Yarbrough, the Dryden Press. The International economy, third edition, Peter B. Kenen, Cambridge university press. Le Système Monétaire International à travers les ages, Pierre Bezback, folio editions. [...]

[...] The US no longer sought to mobilize the system for reform. By late summer 1971, benign neglect was no longer a sustainable policy. On August President Nixon announced a new economic policy: henceforth, the dollar would no longer be convertible into gold, and the US would impose a surcharge of 10% on dutiable imports in an effort to force West Germany and Japan to revalue their currencies. The shock of August was followed by efforts by the Group of Ten (Belgium, France, Germany, Italy, the Netherlands, Sweden, Canada, Japan, the United Kingdom, and the US) under US leadership to patch up the system of international monetary management. [...]