The History and Future of the International Monetary System

This paper intends to show logically that the step needed in international monetary reform is the addition of flexibility to the adjustment mechanism. The performance and evolution of the present international monetary system is examined, International monetary reform proposals are analyzed. This analysis entails a description of how the international monetary system would function under these proposals. The performance and shortcomings of each proposal are discussed. On the basis of the review of the history and the analysis of the reform proposals for the international monetary system, a conclusion that the adjustment mechanisms must be flexible is reached. The plan of the paper divides the contents into four sections. The first section deals with the history of the international monetary system. This covers the gold standard period (1816-1913), the period of the gold exchange standard (1914-1950) and the birth of the International Monetary Fund. The second section investigates the present dilemma of the current gold exchange standard. Section III deals with reform of the international monetary system. The key currency countries and the Continental European positions on reform are also given. Next, four reform proposals are considered. The proposals are: the Triffin plan, the Stamp plan, monetary integration and flexible exchange rates. In concluding, the final section indicates the need for flexibility in the adjustment mechanism and the difficulties inherent in attempting to provide this flexibility