currently used are "par" for gold parity
and "parity" for
the relationship of the par values of two
currencies. The
initial parities were published for 32 countries on
18
December 1946. For the others the operation took place
later on.
v t >
i
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-This "duplication of credit" by
the adjunction of local
inflation to the American inflation, in itself
contributed to
accelerating the rise in prices in countrieswith
excessbalances
in comparison with the U.S.A., as certain phases
of the history
■i /
of France and the Federal Republic of Germany
illustrate.1^
Through a secondary effect the developing countries in turn
will
fall victims to the system through the deterioration of their
terms of trade and, in a more general way, through
imported
inflation.
79. General de Gaulle's policy, which consisted of modifying
the structure of French reserves in such a way as to favour gold by buying it instead of dollars, increased the general lack of
confidence in the dollar and left its role as a reserve currency still more open to question.
80. The sterling crisis caused the United States, as we have
seen, to defend the official price of gold at 35 dollars an ounce whereas in practice this price had risen considerably. The
United States lost a great deal of gold in this exercise and in
the end the pound was devalued. Moreover, when the gold pool
set up in 19Ó1 was dissolved in Washington in March
1968,
thisresulted in the appearance of a double gold market which merely
u
A regorous analysis of this type of inflation has beenconducted by Jacques Rueff and constitutes one of the most remarkable aspects of his works designed to provide a clearer understanding of the Gold Exchange Standard and its effects.
In his speech before the IMF Annual Meeting in September 1972, the Minister of Finance of the Federal Republic of Germany, Mr. Helmut Schmidt, stressed the acceleration of
inflation due, according to hin, to the establishment of SDRs. Since the main beneficiary of the SDRs are the industrialized countries and first and foremost the USA,
the responsibility of these Countries for world inflation,
and especially for the deterioration of the developing
countries' terns of trade, seems even less contestable.
I
«
- -59
-reflected the actual increase in the price of gold compared with
its artificial price of 35 dollars an ounce. But is also meant
that the dollar was over valued-.
The succession of monetary events only reflects the
fundamental contradiction between the two prices of gold and
the United States1 attempt to maintain the gold exchange standard.
Yielding to the prevailing pressures, the floating of
the dollar was decided on the 15 August which meant the end of convertibility into gold, after which the Washington Agreements
tooh note of the 8.57$ devaluation while at the same tine
instituting a realignment of the major currencies but not at a uniform rate.
Today, however, on the unofficial market, the collar has
been devalued by
100%,
since the price of gold has doubled andreached 70 dollars an ounce. This explains the new devaluation
of the dollar.
81. The difficulties of the dollar standard and its
vicissitudes have therefore induced many economists to suggest
a neutral currency.
IV. A NEUTRAL CURRENCY AS THE BASIS OF THE NEW SYSTEM
82. Thus, a large part of public opinion, even in the United States, thinks that the central role of the dollar should be
brought to an end and the U.S. government has begun to make its point of view known.
83. It can be said that generally speaking, the international monetary system should tend to greater neutrality. But what does neutrality consist of?
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-84. For the United States, the United Kingdom, and
many-developing countries,•a neutral system
would
be onebased
on an"international currency", along the lines
of the
SDRs,not linked
to gold which would be demonetized.
For France, a fair and equitable system would be one based on gold although this does not mean a return to the gold, exchange standard.
V. 1U0TAS. SDRs. VOTING RIGHTS. RUL3S OF PROCEDURE
85. In some explanations of the quota question and its implications there seen to have been some misunderstanding.
06. In the beginning there was the desire to establish quotas in conjunction with a set of economic data, the same for all economies so as to obtain an "objective." quantitative
evaluation of the quotas, in.other words, i.e. the member
countries' contributions to the Fund's capital. Thereafter
the quota would more less determine the drawing rights, use of
the Fund's resources and voting rights.
Primary distribution of voting rights within the Fund has thus become "personal", and this, together with the rules
of procedure for decision-taking, provides the final picture
of the IMF. 3y considering that such and such a decision by
its nature requires such and such a majority, a functional
structure was introduced in which the interplay of powers took place,
87. When we examine in detail the different types of quantitative relations which make up the primary distribution
of powers, and also the rules of procedure, we see that behind
this scientific appearance there is much that is arbitrary,
- Ó1
-although there is a need to define the meaning and importance
of the arbitrary factor thus introduced into the Fund's operation.
Let us first of all recapitulate some types of relations.
The Quotas
80. When, for instance, a joint stock company is formed
there are several ways of determining each member's contribution,
either quantitatively
(volume)
or qualitatively(different
subscriptions in cash or in kind). All these possibilities are even greater when members are not individuals but countries,
because of the complexity of their economies.
89. In the IMF the formula which determines these contribu¬
tions is known as the Bretton Woods Formula. It is the result of taking intc consideration many factors; national income,
reserves, imports, exports. But each of these factors is weighted by co—efficients which have not been strictly determined.
A very simple presentation of the Bretton Woods formula
can be made. For a given country A, the quota is calculated with the following factors:
V = National •' 1 : " ' V — Volume of reserves
M = ■Average imports
hh X - Maximum variation of exports during the last five years;
,v . , :
V .=• X