Thursday, February 2, 2017

IMF - Global Reserve System Documents

List of the paper on the IMS reform.

Fund's papers

The Liberalization and Management of Capital Flows — An Institutional View; November 14, 2012
    - Paper
    - PIN
    - IMF Survey article
Reforming the Economic System Podcast Martin Wolf; June 8, 2012
Liberalizing Capital Flows and Managing Outflows; May 4, 2012
    - Paper
    - PIN
    - Background Paper
Capital Inflows, Exchange Rate Flexibility, and Credit Booms; Magud, Reinhart and Vesperoni; February 1, 2012
Internationalization of Emerging Market Currencies: A Balance Between Risks and Rewards; Maziad, Farahmand, Wang, Segal and Ahmed; October 19, 2011
Financial Deepening and International Monetary Stability; Goyal, Marsh, Raman, Wang and Ahmed; October 19, 2011
Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (IMF Book Event); Eichengreen; October 19, 2011
    - Event page
    - IMF Survey Article
The IMF and the International Monetary System: Lessons from the Crisis (Per Jacobsson Foundatation Lecture); Weber; September 25, 2011
    - Text of the lecture
    - Video of event
Strengthening Assessing Reserve Adequacy; IMF Policy Papers; February 2011
Enhancing International Monetary Stability—A Greater Role for the SDR?; February 2011
    - Public Information Notice
    - Main Paper
    - Supplement
Reserve Accumulation and International Monetary Stability; April 2010
    - Public Information Notice
    - Main Paper
    - Supplement
Exchange Rate Regimes and the Stability of the International Monetary System : Overview only; Atish R. Ghosh, Jonathan D. Ostry, and Charalambos Tsangarides; 2010
The Debate on the International Monetary System; I. Mateos y Lago, R. Duttagupta, R. Goyal; November 2009
A New Bretton Woods?; Boughton; March 2009

Papers written for the G-20

G20 Leaders' Declaration; Los Cabos, Mexico; June 9, 2011
G20 Cannes Summit Final Declaration; Cannes; November 4, 2011
G20 Leaders Summit Final Communique; Cannes; November 4, 2011
Communiqué of Finance Ministers and Central Bank Governors of the G-20; Paris, October 15, 2011
    - English
    - Français
Palais Royal Initiative (Camdessus Group) ReportLonger version (February 2011) | Initial Report (January 2011)
G20 Principles for Cooperation between the IMF and Regional Financing Arrangements, as endorsed by G20 Finance Ministers and Central Bank Governors October 15, 2011

Other papers/commentaries

The renminbi bloc is here: Asia down, the rest of the world to go?; Subramanian and Kessler; October 27, 2012
The Renminbi Challenge; Eichengreen; October 9, 2012
The dollar's days as reserve currency are numbered -- Subscription required; Eichengreen; October 8, 2012
The Federal Reserve and Currency Wars; Ocampo; October 2, 2012
The Dollar and its Discontents; Olivier Jeanne, May 31, 2012
The next steps in ASEAN+3 monetary integration; Pradumna B. Rana, 27 May 2012
When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets; Chitu, Eichengreen and Mehl; May 23, 2012
    - Summary
    - Paper (for subscribers only)
Beggar-thy-neighbours? Spillover effects of exchange rates; Mattoo, Mishra and Subramanian; May 23, 2012
Country Size, Currency Unions, and International Asset Returns -- Abstract only, access to full paper for subscribers; Hassan; May 2012
Bubble Thy Neighbor: Portfolio Effects and Externalities from Capital Controls -- Abstract only, access to full paper for subscribers; Forbes, Fratzscher, Kostka and Straub; May 2012
Prudential Policy for Peggers -- Abstract only, access to full paper for subscribers; Schmitt-Grohe and Uribe; May 2012
The turn of emerging countries; Angeloni; February 23, 2012
Europe v. World; Truman; February 14, 2012
Don't let the euro-crisis go east; Bénassy-Quéré, Fan, Kawai, Kim, Park, Pisani-Ferry, Vines and Yu; February 3, 2012
Gold and the international monetary system; Chatham House; February 2012
The ten roots of the Euro crisis; Darvas; January 11, 2012
The New International Economic Disorder; El-Erian; December 21, 2011
Reform of the international monetary and financial system; Bush and Farrant; December 21, 2011
The Dollar’s Long Tail; Sanyal; November 28, 2011
What makes a reserve currency? -- Requires subscription; FTAlphaville; October 5, 2011
How to deal with a global Triffin dilemma; Saccomanni; October 4, 2011
The Triffin dilemma revisited; Bini Smaghi; October 3, 2011
Currency wars: Lessons from the US experience: 1973-95; Bordo and Humpage; October 3, 2011
An Examination of U.S. Dollar Declines; Roosevelt D. Bowman and Jan J. J. Groen; September 26, 2011
Currency wars; Dadush and Eidelman; September 23, 2011
Managing exchange rate misalignment and current account imbalances -- ECB Research Bulletin; Dedola; Summer 2011, pp. 2-7
Countering the Contagious West; El-Erian; September 19, 2011
Reforming the International Monetary System; Farhi, Gourinchas and Rey; September 19, 2011

    - e-Book
    - Article
Monetary policy before the crisis; Gerlach and Moretti; August 2011
International Financial Crises and the Multilateral Response: What the Historical Record Shows -- Abstract only, access to full paper for subscribers; Barkbu, Eichengreen and Mody; August 2011
Dollar Illiquidity and Central Bank Swap Arrangements During the Global Financial Crisis -- Abstract only, access to full paper for subscribers; Rose and Spiegel; August 2011
What Can Replace the Dollar?; Eichengreen; August 2011
The capital flow conundrum; Dadush, U. and Stancil, B.; July 2011
A Post-Crisis World of Risk; Spence, M; June 2011
How to Kill a Dollar; Eichengreen, Barry; June 2011
Why are reserves so big? And who’s to blame?; Dadush and Stancil; May 2011
The Bear of Bretton Woods; Eichengreen; April 2011
Reform of the international monetary system: Some concrete steps; Bénassy-Quéré, Pisani-Ferry and Yu; March 2011
The Long March Towards a Multipolar Monetary Regime; Bénassy-Quéré and Pisani-Ferry; February 2011
Why world needs three global currencies -- Requires subscription; Bergsten; February 2011
Currencies: Strength in reserve -- Requires subscription; Beattie; February 2011
Quelle Reforme Pour Le Systeme Monetaire International? -- in French; Farhi, Gourinchas and Rey; January 2011
International Monetary System; Banque De France; 2010
International Monetary Arrangements; Landau; September 2010
Does the SDR have a future? ; Cooper; March 2010
The Dollar: Dominant no more?; Eichengreen; January 2010
Understanding SDRs; Williamson; 2009
The dollar's fall reflects a new role for reserves -- Requires subscription; Feldstein; December 2009
What Triffin dilemma?!; Chavelle; October 2009
On the Agenda for Bretton Woods II; Williamson; October 2009
Why SDRs Could Rival the Dollar; Williamson; September 2009
The Chinese Proposal for a New Global Super CurrencyRequires Subscription; Roubini; June 2009
Will SDRs supplant the dollar?; Humpage; May 2009
We should listen to Beijing's currency idea -- Requires subscription; Bergsten; April 2009
Why agreeing on a new Bretton Woods is vital and so hard -- Requires subscription; Wolf; Financial Times; November 2008
The IMF as a global Fed; Chavelle; October 2008
End of the BWII regime; Setser; October 2008
The Fund must be a global asset manager -- Requires subscription; Bordo and James; October 2008
Why the euro will rival the dollar; Chinn and Frankel; 2008
Blueprint for Reform; Sachs; 2008
Will there be a dollar crisis? -- Abstract only, full text requires subscription; Krugman; 2007
From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege -- Abstract only, full text requires subscription; Gourinchas and Rey; 2005
An Essay on the Revived Bretton Woods System; Dooley, Folkerts-Landau and Garber -- Abstract only; 2003


Thursday, January 19, 2017

CIA - 1967 - An article about Gold Standard

Mr. BREWSTER. Mr. President, whenever the subject of the gold standard is raised as a topic of conversation, invariably a great deal of misinformation is presented. 

The Washington Post on Sunday, December 3, 1967, published an article entitled, "It's Just a Lot of Bullion,"
by Mr. Harvey H. Segal, that clearly sets forth the facts concerning the value of gold

-> The idea of closing the Gold window was floating in 1967, implemented by Nixon in 71.


CIA - 1971 Intelligence Memorandum - The World Gold Market - A Semiannual review

Covers aspects as Soviet and South African gold sales in details, and cover UK, Switzerland role in the market. Burma and Turkey had BoP difficulties and sold to US.


Monday, December 12, 2016

Global trend in - Evolution of International Monetary System

Most traders and businesses walk knee deep in sea of information moving markets, feeling daily movements of exchange rate waves and periodic business cycles like high and low tides. But to feel the stream of ocean to know the direction one must swim further and deeper far outside of well travelled monetary sea roads where movements are tracked in years or decades. Let me bring you few Thoughts.
Since the year 1971 and the day when Richard Nixon "broke the gold window" we live in a USD dollar dominated International Monetary system (IMS). Some say this is a non-system. Never the less the arrangement is very asymmetrical with only one debtor of international monetary reserves, the United States of America. So far it has proven to be rather very resilient but since seventies there are continuous discussions on a changeover and systemic improvements. Reserves of other states and monetary liquidity still depends on U.S. deficits - Itself a multilateral issue. Other possibilities like SDR have proven to be just a dead end, the complementary reserve asset is not to become major part of asset portfolios. The wider Triffin dilema is well present and still valid. It is to be seen if a shared responsibility in Multi polar multi reserve IMS would bring pareto-efficient solution of countries willing to share the burden. I do share thoughts, allegory of Tommaso Padoa-Schioppa on inventing a flying object, that inventing a fully aeroplane is another issue.
The system is evolving, it has never stopped nor started. The ascent of first truly modern currency the € brought gradually the end of the chronic dollar inflation exports. These famous words of Nixon-era US Treasury secretary John Connally "The dollar is our currency but your problem" are now in reverse. The move to Bipolarity (€-$) is slowly enforcing US fiscal discipline. The Exorbitant privilege becomes Exorbitant burden. The biggest bull market in government bonds is at its end, while interest rates have fallen in defence of the system. Lifting them too fast now could bring the whole system down. International cooperation has created safeguards, institutions like IMF changed its modus-operandi, new were created, like for example the Financial Stability Board (FSB), or regional Asian AIIB.
Many economists missed the 2002 Willem Frederik „Wim“ Duisenberg Aachen acceptance speech and do not understand its implications:
“The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.”
The Euro is simply irreversible. There are issues with fiscal rather than in monetary plane. Another issue many confuse. The Euro area may be seen not as Mundel´s optimal currency area but BoP surpluses are no more recycled into US Treasuries and US debt instruments but into deficit of close economic partners who need to implement structural reforms until then Target2 imbalances will still be with us.
The system is evolving. The end of 2014 experienced the change in the mode for oil exporters when financial intermediaries are loosing pricing power and "high volume" becomes again the predominant mode rather than the maximization of profit based on high price. The market cap of oil market experiences a drop from 2,5T $ to about 1,2T $. The global FX activity peaked at the same time. The whole energy complex went down, commodities bubble naturally came down as well as energy is often a major part of commodity direct expenses. Not surprisingly central bank forex reserves peaked in the same time as well. Central banks became providers of liquidity expanding their balance sheet and monetary base. Oil producers return to pre 1971 "floating dollar" of no shortages era where long term strategy with about 10% readily available reserves in case of disruptions are readily available instead of just-in-time deliveries as in volatile post Nixon world and they have now changed their dollar pegs due to new currency regime to floating.
€ and $ together represent over 40% of the world economy and China´s Renmimbi about 14+%. Multi polarity grows. Currency area-wise, the Euro area is growing while the USD currency area camp is shrinking on the background of China creating slowly its own currency area. The Euro area has both accounts positive, capital and balance of payment (BoP), invests outside and it simply exports more stuff than it imports and given the fall in energy prices, it implies improvement of Europe´s competitiveness as it is a net importer of energy. The opposite of what happened to Italy during the Oil shocks (artificial 400% increase of oil price).
Rules of the game are changing on the background of new economic system emerging. It is the surplus economies who direct the shape of monetary system. But in interdependent global system the win-win option is cooperation of debtors and surplus economies to bring inefficiency of surpluses and deficits with too high cost of holding reserves. Addressing the issue from int. reserves focus point of view the solution would be one world currency which is politically not reachable. Other more workable solution is fully functional floating rate world not requiring additional reserves but pure such system is just hypothetical. The world may even experience next gold fever would main reserve holders find workable solution for inherent undervaluation and two tier market, so this old asset may still be considered to bring IMS improvement. There are trends to be followed. One such is that all surplus economies EU, China, Oil exporters are located on EuroAsia continent while the system is underwritten by biggest debtor the US which lost its primacy as a major economical power.
In other words monetary affairs is after 50 years of dormant hibernation slowly becoming very interesting topic.
Now we watch together!                      

Friday, October 14, 2016

The French Factor in U.S. Foreign Policy during the Nixon-Pompidou Period, 1969–1974

by Marc Trachtenberg

"...The crisis, though long expected, came to a head in mid-1971. The new secretary of the treasury, John Connally, laid out the policy in May. The crisis would be allowed to develop “without action or strong intervention by the U.S.” At an appropriate time, the gold window would be closed, and trade restrictions would be imposed. This would lead, at least for the time being, to a system of floating rates. The main goal was to get the surplus countries to revalue their currencies, but the United States would make clear—both for bargaining purposes and as a fallback position if revaluation negotiations failed—that it could live indefinitely with the floating rate system.35 Nixon approved this course of action and wanted to “move on the problem,” not “just wait for it to hit us again.”36 The new measures were announced on 15 August. The gold window was closed, a border tax was imposed. Nixon had gone on the offensive. The tone of U.S. policy in this area was nationalistic. The emphasis was still on getting the Europeans and the Japanese to accept a substantial realignment of exchange rates, but the goal of systemic change had not disappeared entirely. According to Shultz, who was in a position to know, the 15 August package “was designed to be a signal that the United States was seeking a fundamental change not only in existing exchange rates but also in the monetary system itself.”37 Shultz’s influence at this time was on the rise. By late 1971, Nixon had evidently come to share the Shultz view that a major structural reform was needed and that it would be a mistake to go back to the “old system of parities, but with different exchange rates.”38 This was probably why the question of a devaluation of the dollar in terms of its gold price was now so important. If the price of the dollar could be set in terms of gold, then why should all the exchange rates not be set by international agreement? That was the old system, and the basic goal now for Shultz and, increasingly, for Nixon, was to move on to something better. But Connally, who was being criticized for his rough tactics, was under pressure to settle, and he in effect offered to devalue the dollar as part of a rate realignment package.39 Nixon, who had made clear he did not favor devaluation, was angry.40 But the Connally offer could not be rescinded. A series of negotiations between the West Germans and the French; then between Nixon, Kissinger, and Pompidou in the Azores; and, ªnally, in late December 1971 between all the major trading nations at the Smithsonian Institution in Washington—followed in rapid order, leading to an agreement that set new parities but did not restore convertibility. The United States, however, did little to “defend” the new rates.41 Shultz had taken over from Connally as secretary of the treasury in early 1972, and the choice not to defend the rates was in line with Shultz’s basic approach to the problem. His goals were more ambitious than Connally’s had been. He wanted a fundamentally new system in which the market would play the central role in setting exchange rates. But he was no Texas cowboy. His methods were subtle and indirect. He thought of himself as a strategist who sought to “understand the constellation of forces present in a situation” and tried to arrange them so that they pointed “toward a desirable result.” The aim was not to dictate the terms of a settlement but “to get the right process going” and allow things to take their course.42 Shultz’s style was thus not to force his views directly on other people. He was a “conciliator and consensus builder” and could “work with almost inhuman patience to bring a group into agreement upon a decision that all could support, at times submerging his own preferences.”43 The most striking example of this was his willingness in mid-1972 to accept a “par value system supported by official convertibility of dollar balances,” provided the burden of adjustment was shared equally by both surplus and deficit countries.44 A plan of that sort (which, however, would also allow countries to “float their currencies”) was announced in September 1972.45 The plan was well received because it showed that the U.S. government was serious about reform. For Shultz, however, a negotiation based on this kind of plan was not the only way to bring a new system into being. For him, the road to reform had two lanes, “one of negotiations and the other of reality. A conclusion would be reached only when these two lanes merged and the formal system and the system in actual practice came together.”46 A system of floating exchange rates came into being de facto with the collapse of the Smithsonian agreement in early 1973. The two lanes converged when the reality of the floating rate system was recognized by the Jamaica agreement of January 1976..."

35. Treasury Paper, 8 May 1971, in FRUS, 1969–1976, Vol. 3, pp. 423–427, esp. 425. 36. Huntsman to Connally, 8 June 1971, in FRUS, 1969–1976, Vol. 3, p. 443. The Nixon tapes provide some extraordinary insights into U.S. policymaking at this point. Some key passages were transcribed and presented in Luke Nichter, “Richard Nixon and Europe: Confrontation and Cooperation, 1969–1974,” Ph.D. Diss., Bowling Green State University, 2008, ch. 3. 37. Shultz and Dam, Economic Policy, p. 115. 38. Editorial Note, in FRUS, 1969–1976, Vol. 3, pp. 521–522. See also a letter of 8 September 1971 to Under Secretary of the Treasury for Monetary Affairs Paul Volcker from Shultz’s assistant director, Kenneth Dam (he and Shultz later wrote a book together), cited in FRUS, 1969–1976, Vol. 3, 179 n. 1, and warning (in the editor’s paraphrase) that “focusing on quantitative goals before agreeing on the type of international monetary system the administration wanted might constrain long-term options.” See also Nixon-Kissinger Telephone Conversation, 28 October 1971, in Kissinger Telephone Conversations Collection, DNSA/KA06727.

"So the whole point of an interventionist policy in this area was not to help the Europeans with their monetary problems, but to keep the Europeans from coming together as a bloc. The idea was that the United States might be able to achieve that goal by selectively intervening on a country-by-country basis. U.S. officials took for granted that they could not oppose the Europeans head on: “We couldn’t bust the common float without getting into a hell of a political fight,” Kissinger said. The United States had to do what it could “to prevent a united European position without showing our hand.” He emphasized that this policy was not based on an assessment of U.S. economic interests: his objection to what the Europeans wanted to do “was entirely political.” He had learned from intelligence reports that all of the administration’s enemies in the West German cabinet “were for the European solution,” a disclosure that pretty much decided the issue for him.76 A year later, at a time when U.S. problems with Europe were coming to a head, he laid out his thinking on the issue in somewhat greater detail. “We are not,” he said, “opposed to a French attempt to strengthen the unity of Europe if the context of that unity is not organically directed against us. So I am not offended by the ºoat idea as such, or by common institutions. If, however, it is linked to the sort of thing that is inherent in the Arab initiative [i.e., the Europeans’ plan at that point for a “dialogue” with the Arabs, which Kissinger viewed as a hostile move], as it seems to be, then we have a massive problem. Then we have the problem that we have got to break it up now.”77"

74. Nixon-Kissinger-Shultz Meeting, 3 March 1973, Tape Transcript, in FRUS, 1969–1976, Vol. 31, p. 79. 75. Brandt to Nixon, 2 March 1973, in FRUS, 1969–1976, Vol. 31, p. 49; and Nixon to Brandt, 3 March 1973, in FRUS, 1969–1976, Vol. 31, p. 92. 76. Kissinger-Simon Telephone Conversation, 14 March 1973, in DNSA/KA09752; and KissingerSimon Telephone Conversation, 15 March 1973, in DNSA/KA09779. Extracts were also published in FRUS, 1969–1976, Vol. 31, pp. 123, 126. The following month another intelligence report about Brandt was circulated to top U.S. ofªcials. “Apparently,” Federal Reserve chief Arthur Burns wrote in his diary on 3 April 1973 that “we know everything that goes on at German cabinet meetings.” Arthur Burns Journal II, p. 60, in FDPL. 77. Secretary’s Staff Meeting, 22 March 1974 (dated 26 March), p. 50, in DNSA/KT01079. Note also a comment Kissinger made in a 6 March 1974 meeting with Secretary of Defense James Schlesinger: “I am convinced we must break up the EC. The French are determined to unify them all against the United States.” See DMPC:Nixon/FDPL.