Taking the Monetary Initiative

Abstract

A WORLD economy must be managed (de facto or de jure) by a mix of national dominance and international policy L coordination. As the dominance of the United States shrank over the past decade?in fact if not in the consciousness of all U.S. policy-makers?some degree of integration of policy became necessary, at least among the major nations. The alterna tive was to risk the benefits of international intercourse by revert ing to uncoordinated exercise of autonomous national policies. The realization of this need, however, was fostered only by crises, such as the London gold flurry in i960, the convulsions surrounding exchange-rate changes of major currencies in 1961 and 1967, increasing concern about the gold convertibility of the dollar, and most recently by the gold rushes of late 1967 and early 1968. Despite the successive deepening of these perturbations, policy integration progressed far enough each time only to satisfy the decision-makers that they could now avoid repetition of the previous outburst. The plans of the central bankers, like those of the generals, were usually directed to the last battle. It is the thesis of this article that fundamental decisions are needed to