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Discussion before
the
Committee on International Finance
Pennsylvania Bankers Association

Karl R. Bopp

Board Room
Federal Reserve Bank of Philadelphia
Thursday, September 14* 1944




International cooperation versus unilateral
approach - experiences between the wars period of unilateral and bilateral approach
to international economic problems
1«

Each country tried to
A*
B.

2.

Protect itself and
Take advantage of neighbors

Devices used
A«
B.

Quotas

C.

Multilateral currencies

D.
3*

Currency depreciation

Bilateral agreements

Results
A.

United States foreign Trade

Exports
Imports
B.

1919
7.9
3*9

1929
5*2
4*4

1932
1.6
1*3

1939
3*2
2*3

Hot money

4 « Conclusion - cooperative action merits a
.
trial




-2II. Timeline88 of action
1.

Time to do something for stability is
when there is danger of instability
Hot when everything is stable

III.

The proposed International Monetary Fund
and Bank
1.

„
'

^

The International Monetary Fund
A.

Objectives
a*

b.

B.

Reasonably stable standard of
international exchange to which
all can adhere
Without sacrificing freedom of
action needed to meet internal
economic problems

Method
a.

Stability without rigidity
Conditions for change (IDJtflOJt+XJl)

b.

Tiding over temporary embarrassments
(I) Quotas
(II)




Safeguards against misuse

-3(1)

25% - 200%

(2) Only for current trans­
actions
(3) Repurchase provisions
(4) Charges
(5) Declaring ineligible
(A) If using for contrary
purposes
(B) Or for capital transfers
(C) Failure to fulfill
obligations
C. Management and control
2« Alternative solution - the key-country
approach
A* What it is
B. Inadequacies
a. Crises do not necessarily originate
in key countries
Prepare in advance ( f n f f l r
pt f B f f )
wherever they occur (international)
b Resentaent of excluded nations



-4 c. Build up blocks and satellites
Key countries negotiate for
satellites?
How about Canada?
- with U. S.

+ with 0. K.

d. Commodities or countries as key
e.g. - wheat
3. International Bank
A. Purposes
B Method
.
a. To facilitate foreign private
loans
b. To guarantee - with prior member
guarantee
c. Participate in loans
dm

Lend

I . Conclusions
V*
1. Wisdom of international collaboration
2. Necessity for concrete plans




Principles and objectives of M F and IB
provide a sound foundation for a suitable
policy and program
Not a panacea