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THE IN T E R N A T IO N A L M O N ETARY FU N D by Karl R. Bopp American Institute of Banking Philadelphia Chapter Midday Club October 16, 1944 t*A !*y f £*+* ^ u V ÁUa^ c*¿¿L / kJhtX*.i....^ /V Um"'"' " , í-*jt -tfm* *i ^ytv» «- '**”* ^ »■tt / $ yf*-«-t« tf» ><fy, CÁ*&A*t/cct II.« » te <¿t J£¿+ d ú u *¿Jl '&iajL4¿t*-. ^ ¿Hcjuc $ uC**s4 ^ /<í A#¿Au>* *** yÄt ^ Purpose To facilitate the steady and balanced expansion of international trade Everyone agrees on desirability 2 II. Why agreement on objectives is not enough What prevent^ achievement? A* Disequilibrium 1 ¿u £ua^^-*~^ w c , 1. Fundamental EL = $50: = $.05 Affects all countries Solutions are CtftttBg* in internal value Chapge in external value 2. Temporary -^emergency a. How they arise b. Remedies -Tvi^ 1) Restrict purchases to available resources 2) Depreciate 3) Provide temporary funds Alt. &w«JdL V* ^ iu^U*~d 3 III. KeetTiefrions of unilateral actions A. B. C. D. Competitive exchange depreciation Multiple currency systems Bilateral clearing agreements Exchange and trade controls Quotas, etc. IV. Mb é predominant solutions A. The Bretton loods agreement B. Key-Country Approach 2-, J — The~InLeroaxionai i^et^ry Fund A. History Merits recording because for the first time in history officials thought in the open record available in Federal Reserve Bulletin 1« Preliminary discussions in fall of 1941 Secretary Morgenthau asked White to study. Started with tripartite accord of 1936 2. Stabilization Fund draft of April 6, 1943 "It is hoped that the appended draft will call forth from the experts of the United Nations critical comment and constructive suggestions. It is our belief that a workable and acceptable plan can emerge only from the joint efforts of the United Nations•* vpcdAy 3. Clearing Union - April 7, 1943 "It is hoped that these proposals will afford a basis for discussion, criticism, and constructive amendment together with similar plans having similar objectives which nay be prepared by experts of other governments." Canadian observations - July 12, 1943 Revised International Stabilization Fund draft - August 20, 1943 After discussions with experts of many nations lUX/dL "Published with the hope that it will call forth further comments and con structive suggestions.” (¿JJ Joint statement of experts - April 21, 1944 CuA4«i«»^ + *tu * MM«, 7« Preliminary conference, Atlantic City, June 15-29, 1944 8 *~ y ji . Brettan Woods - July 1-22, 1944 (44 nations) ^ + * * * & ***-+«■ ^ — ~.V ^•^4 «. a***.. tAt-. 9* Ho other comprehensive plan was proposed Hot until the recent convention did the ABA establish a conaittee to formulate a program« 6 B. Principles Stable but not rigid exchange rates Guarantee of gold value of the Fund 2 . Reduction and eventual elimination of exchange restrictions Report after 3 years Consent to continue after 5 years Pool of Fund to tide over emergencies a. Each member contributes an amount (quota) to a common pool. 25% of quota or 10% of holdings in gold Remainder in local currency b. Each member has limited access to the pool: limitations 1) 25% of quota per year - 200% total 2) Repurchases 3) Uses U ) Charges - distribution of income 5) Declaring ineligible Management 1. Votings 2. Board of governors 3* Executive directors - at least 12 5 2 5 2 4« - 250 + $100,000 appointed by largest quota members non-appointing American republics other non-appointing members largest "creditors” after 2 years Managing director 8 VI. The key-country approach Diverse proposals - not clèar-cut A. Principles 1« Initial IhS.-U.K. agreement on sterling/dollar rate Other currencies linked to one or the other 2* Large ($5 billion) grant-in-aid or gift or loan to Great Britain fin /? Aid to others as they adopt policies we consider appropriate 9 VII. Similarities and differences between the two approaches A. B. Similarities 1. Success of both depends upon reduction in trade barriers and sound internal financial; & economic policies 2• Dollar-sterling rate crucial 3« Chief responsibility and authority to major countries 4« Provide stabilization credits Dissimilarities 1. 2. Bole of small nations / 7, %13 Fund discourages, key-country encourages formation of blocks 3* Fund has place for non-members of blocks U* Key currency on a product basis Wheat: 5* U.S., Canada, Argentina, Australia Fund agreement by technicians of 44 nations Continues war partnership 6« Fund prepares for crises wherever and whenever they occur ---
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