Tomorrow's convertibility: aims and means of international monetary policy

Abstract

The European convertibility decisions of last December, despite being long overdue and ill-prepared, mark an important step forward on the long road from the international monetary chaos of the last decades toward a new international monetary order. The present article explores some of the means by which the new convertibility could be given more solid foundations and contribute, at the same time, to a more rapid and balanced growth of the world economy. The author first argues against two plausible yet illusory solutions to the immediate difficulties that may arise from the impending shortage of international reserves and liquidity - an upward revaluation of gold and freely fluctuating exchange rates. The internationalisation of foreign exchange reserves under the aegis of the International Monetary Fund is then advocated as a workable and viable system which would facilitate the adjustment of the Fund’s lending operations to the legitimate requirements of an expanding world economy and help stabilise the world monetary system against the vicissitudes of national monetary management in the present key currency countries. JEL: E42, E52, F31, F33, F36