When the Dollars Come Home

The world's international monetary system, basically unchanged since the historic Bretton Woods Conference of 1944, is about to be probed and prodded for signs that it may need some repairs. At the week-long annual meeting of the International Monetary Fund in Washington last week, 800 of the world's leading financiers -- including 75 finance ministers and 75 central bank chiefs -- agreed to re-examine the mechanism through which most of the free world's trade and commerce operate.

Both the staff of the IMF, under new Chairman Pierre-Paul Schweitzer, and a separate committee from ten wealthy nations will begin weighing proposed reforms, be ready to report their recommendations to next year's IMF meeting in Tokyo.

Too Inflexible? The two studies could mark the beginning of an important reform of the monetary system--or they could produce nothing at all. Critics point out that most of the ten nations have already come out against any real changes, and that the IMF has said that it likes things the way they are. Nonetheless, the very launching of the studies is a concession to the concern of many experts that the monetary system has become too inflexible for a changing world--and should force the monetary men either to recommend changes or spell out why they are unnecessary. The U.S. Treasury, which last year opposed such a study, has been pressured by the Administration into backing this one; Treasury Under Secretary Robert Roosa is, in fact, the chairman of the ten-nation group.

The U.S. has no desire to change the system for its own selfish ends, but it is a fact that it has long suffered from a bothersome payments deficit simply because it exports so much money in foreign aid, in investments and in loans to foreign nations that do not have large capital markets. French Finance Minister Valery Giscard d'Estaing announced at the meeting that France is growing uneasy about holding so many dollars as a result of the U.S. deficit. On the other hand, British Chancellor of the Exchequer Reginald Maudling, a pioneer in asking for monetary reform, pointed out that those exported dollars have provided the free world with much of what bankers call liquidity--the convertible money and available credit that support trade. He warned that this liquidity may dry up when the U.S. closes its payments gap--and Treasury Secretary Douglas Dillon gave point to his warning by announcing that the U.S. had cut its heavy deficit in the third quarter, and hoped to wipe it out within two years.

Irritated Ministers. Aware of what dollars fleeing homeward could do to world trade, the two study groups are sure to consider ways to: 1) increase international credit and convertible cash; 2) increase the reserves and powers of the IMF; 3) expand the free capital markets outside the U.S. The studies are bound to cause a stir among the world's money managers. They have already irritated finance ministers from the underdeveloped nations, who are interested in more aid from the ten na tions that control 80% of the world's gold and currency reserves rather than in academic talk of liquidity. But the World Bank, at least, had some news that they could appreciate. For the first time, said President George Woods, the bank is planning to make longer-term loans to the underdeveloped nations, and will be more liberal in judging what purposes the loans can be used for.

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