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DAILY TELEGRAPH
cutting dated
2.8 SEP 1973
19
Floating towards monetary reform
AS THE annual meetings of the International Monetary Fund and World Bank end, the delegates disperse and the talking stops, the shape of things to come in the sphere of international
becomes monetary reform clearer. The Finance Ministers in the Com- mittee of Twenty have given themselves a July 31 deadline to agree the answers but
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useful technique in particular situations." This is likely to mean that on Day One of the new monetary system each country will be free to choose either a fixed parity or a floating rate.
Second, convertibility. There will be two important stages along the road. Through a series of bilateral negotiations the United States will fund a significant part of its out- standing dollar debts ir the form of Roosa bonds or something akin. To ease the prob- lem of the Middle East oil producing countries' enormous dollar surpluses the World Bank will set up a special agency in the Middle East' through which they may be channelled into appropriate investments..
more significant are the rehabilitation of Boost to
confidence
the United States dollar and the entente cordiale between M. Giscard d'Estaing of France and Mr George Shultz of America.
Mr Shultz's expansiveness may have a deal to do with the improving status of the dollar while Giscard may be adopting a more in- ternational, less chauvinistic posture appro- priate to a future prime minister or even president.
The French and American positions on the key issues of adjusting balance of payments surpluses and convertibility have come much closer. In the light of this gratifying de- velopment it is possible to look at some of the important detail in the first Outline of Reform prepared by the Committee of Twenty and make some guesses at the de- cisions that will finally be taken.
First exchange rates. "Stable and adjust- able par values have been decreed with floating rates "recognised as providing a
Three, gold. The official dollar prices of gold will be abandoned and monetary authorities, including the International Monetary Fund, will be free to deal in gold with each other and to sell and buy gold in the market. This would lead to an upvalua- tion of gold held in countries' reserves because their valuation would relate to the (higher) free market price.
Treating gold in this way would prevent loss of international liquidity which might otherwise result from running down the reserve role of the United States dollar (and sterling). It would also help confidence, the lack of which really destroyed the old Bretton Woods monetary order, during the inevitably slow transition to the new monetary system.
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