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Lethbridge Herald Newspaper Archives

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Lethbridge Herald, The (Newspaper) - April 12, 1973, Lethbridge, Alberta Thursday, April 12, 1973 THr LETHBR1DGE HEKALD B The monetary ai merit and its cure By Dr. I. J. Adcl-Czlowlekowskl, Professo r of Economics, University or Lcthbridgc The international monetary structure, set up almost 30 years ago at the Bretton Woods Conference, is in fact the gold exchange standard in which the U.S. dollar constitutes the main pillar. Under this system it is not gold, but the dollar which plays the role of interna- tional money, provides an in- ternational reserve, and serves as a benchmark in relation to which exchange rates of other national currencies are deter- mined. Naturally, the effective- ness of this system depended upon the strength of the U.S. dollar and the capability of the American authorities to main- tain its convertibility into gold. Because of the United States' chronic deficit in its accounts with other nations, particularly with Japan, Western Europe and Canada, the U.S. dollar weakened and its convertibility into gold was indefinitely sus- pended. This could not fail to undermine other nations' con- fidence, so that creditor na- tions are no longer willing to hold international reserves in U.S. dollars. Bssides tliis basic defect, there are other less obvious though equally serious draw- backs to the present day inter- national monetary order. One of them is the inflexibility of the exchange rates. According to the rules, exchange rates were allowed to fluctuate only by one per cent upward and downward in relation to the U.S. dollar. Obviously this pro- vision did not take into consid- eration the inevitable changes in relative positions of national currencies over a long period of time, and therefore could not be permanently maintained. As it turned out, since the IWJ fcf NEA, foe. "It toys, 'I hate to mtfe you ftel badly, but the weofAet up aorth has beta absolutely beautiful' early 1950s the German mark and the Dutch guilder appreci- ated four times, and since De- cember 1971, the Japanese yen and the Swiss franc by more than 30 per cent, in relation to the U.S. dollar. it has been recognized also that tiie present mtuieuuy tern does not provide lor the regular increase of internation- al reserves commensurate with the rapid expansion ot interna- tional trade. To meet this need lor reserves, as well as to less- en the dependence of tne inter- national economy upon tne U.S. dollar, a conference at Rio do Janeiro in 1967 created a new kind of reserve, in the form of Special Drawing Rigms on the International Monetary Fund. This new kind of reserve could be used either to pay deficits or to replenish memoers' reserves. 'Ihis same purpose, of course, could have been achieved by doubling or 'tripling the prica cf gold, which remained un- chaiigea since 1933. For political reasons, how- ever, the U.S. was adamant on the point of altering the price of the yellow metal. Strong objections to the con- tinuance of the U.S. dollar in its role of a key currency were repeatedly raised in Western Europe. It was pointed out that keeping the U.S. dollar as the international money had great- ly facilitated massive Ameri- can foreign investment in West- ern Europe, estimated at some billion in 1970. A few weeks ago, the president of the Union of Swiss Banks charged the U.S. with financing its enor- mous foreign investment by means of deficits and paper money. All these shortc o m i n g s prompted a search for alterna- tives to the present highly in- adequate and unstable mone- tary system. Several plans of reform were proposed, of which only two seem to merit serious consideration. The one advanc- ed by an eminent French econ- omist, Monsieur Kueff, advo- cates a straight return to the gold standard. This plan has little support among econo- mists, for it calls for a strict monetary discipline and leaves little room for manipulating the supply of money. The other plan, was propounded by a noted American monetary ex- pert, Professor Triffin, and calls for transformation of the existing International M o n e- tary Fund into a true central bank for the world economy, with the authority to create in- ternational reserves as need arises. There are substantial advan- tages to be obtained from Trif- fin's proposal. First, the inter- national monetary reserves would no longer depend upon U.S. deficits, and second, the international monetary system would become independent of the high cost and the vagaries of gold mining, and fluctuations in the supply of gold. There is, however, one as yet insuperable difficulty in the Triffin plan: the reluctance of many states to surrender some national sovereignty to an in- ternational institution such as the transformed International Monetary Fund. The IMF as envisaged by Professor Triffin create purchasing power wHich might be used to trans- fer real income from one coun- try to another. It is doubtful whether nations are prepared at the present time to vest this Book Reviews kind of power in an interna- tional organization. Some academic but very few practical men of affairs are in favor of float- ing exchange rates, fluctuating in response to the demand and supply forces in the foreign exchange market. Our dollar was allowed to fluctuate in the period from 1950-1962 and has been floated since May 1970. The chief advantage of such a scheme is its simplicity and a self-regulatory mechanism. Its major drawback Is that it leads to instability and uncer- tainty which hamper the flow of international trade. For this reason, the floating exchange rates can be regarded as only a temporary arrangement. What plan of reform will fin- ally be adopted depends very much on the recommendation of the Group of Twenty, com- prising the finance ministers of the industrialized countries of the world. To this body has been assigned the task of pre- paring a report on the reform of the international monetary system to be submitted for ap- proval by the forthcoming meeting of the IMF next Sep- tember. Communes, nothing new "The Place Just Right" by Elinor Lander Horwitz, (J. B. Lippincott Company, 158 This is a book about com- raiunes in America and sets out to prove that there is nothing really new under the sun and that throughout the ages man has cherished ideals of a per- fect society. The communal movement be- gan in America in the pre- Revolutionary days and spread into the nineteenth century with the establishing of hundreds of planned communities which at- tracted men and women of a diverse range of social and religious beliefs. Despite perse- cutions in an age of rigid rules of conformity, which turned vio- lators into permanent social out- casts, these brave people prac- Onion Sets 125 per Multipliers 1 Ib........ .79 Spanish 9K onions perbllch Seed Potatoes 5 Ib. bags. Netted Gems Worba Red Pontiac Norland 1.19 1.S9 1.49 1.19 Gladiola Bulbs Pack of 40 bulbs. Assorted in each box. 1.66 box Grass Mixtures Spratts lawn Gross Ib. or Kentucky Blue Grass Hi Ib. Your Choice 1.15 Sturdy Spreader holds 25-30 IBs! Easy to handle economy spreader has an easy flow adjustment and a 16" spread. Makes seeding and fertilizing o simple job. EACH 9.97 Green Plastic Watering Cans Will hoJd approximately 2 gallons. Jdco) for plants or 5ndoor wse. each Pink Vigaro An ideal fertilizer for everything you grow, lightweight organic base. 30 IBs. 8-12-6. 4.47 each Wheelbarrow holds 3 eo. feet Every gardener or handy- man needs a wheelbarrow! This one has a heavy tray, tubular steel handles and semi-pneumatic tires. EACH 12.87 SPRING PLANTING MUSTS Elephant Brand Fertilizer 16-2-0 fertilizer for ell garden needs. 50 noise couW injure or even be fatal. No antiques By Dong Walker There was a Flea Market at McXiDop that antiques had been especially wanted United Church recently. Elspeth saw it as f w saje_ dmt Sfxm iQ a good opportunity to get nd of some 01 Owl had accumulated at our shc 3 thought it was nice of her rxA to have As she roMcd around in our closet included ine. She was in one of her disturbing tny trading she remarked generous moods, I ;