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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« 2. 3* Each country tried to A* Protect itself and B. Take advantage of neighbors Devices used A« Currency depreciation B. Quotas C. Multilateral currencies D. 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. B. Objectives a* Reasonably stable standard of international exchange to which all can adhere b. 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 (pftnffBfflfr) 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 IV.* Conclusions 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
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