Re: World Monetary Reform

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Henry:

The concept of "world monetary reform" relates the task at hand to Keynes as
author of the 1922 work entitled "A Tract On Monetary Reform" and dedicated
"without permission" to the Court of the Bank of England - for, as he
explained in preface, he did "not agree" that bankers were incapable of
understanding the business of banking.

Then - as now - Keynes suggested that economists must shoulder
responsibility for what he perceived to be an unsatisfactory state of
affairs because of their failure to develop adequate monetary economics.

As for post-Bretton Woods world monetary arrangements, I agree that they do
not comprise a "system" in any meaningful sense of the term.

This was not the view among leading U.S. economic scholars in the early
1970s - indeed, as indicated by the title of Paul Samuelson's Newsweek
column in May 1978 entitled "In Defense of Floating", mainstream and
monetarist scholars alike were agreed that the collapse of the Bretton Woods
System had opened the way for a more efficient "system" or set of world
monetary arrangements.

And, given their empiricist approach to real-world economic and financial
issues, it is hard to see how PK economists can disagree with the
mainstream/monetarist consensus as distinct from expressing ad hoc
reservations about specific aspects of the post-Bretton Woods state of
affairs.

Gunnar


----- Original Message -----
From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Monday, April 28, 2003 6:51 PM
Subject: Re: World Monetary Reform


> Gunnar:
>
> We do not have a world monetary system.  We have a dollar system forcing
> itself on the world as a world monetary system through 1) a perpetuation
> of the dollar's role as a reserve currency for trade as set up by
> Bretton Woods while the very bases set up by BW have been dismantled by
> the US, namely the gold standard and a responsible fiscal policy and 2)
> the denomination of basic commodities such as oil, in dollars.
>
> Thus there is no world monetary system to reform, but there is a need to
> build one.
>
> Henry
>
> Gunnar Tomasson wrote:
> > Henry:
> >
> > Let me respond to your statement ---
> >
> > There is an urgent need to restructure the global finance architecture
> > to return to exchange rates based on purchasing-power parity, and to
> > reorient the world trading system toward true comparative advantage
> > based on global full employment with rising wages and living standards.
> > The key starting point is to focus on the hegemony of the dollar. ---
> >
> > with a bird's-eye view of what I perceive to be
> >
> > (a) the root cause of 'dollar hegemony' and, therefore,
> >
> > (b) the starting point for reforming the global financial architecture.
> >
> > 'Dollar hegemony', which I take to be short-hand for post-Bretton Woods
> > world monetary arrangements, was born of an aggressive form of Finance
> > Capitalism operating in an accommodating - to the point of subservience
> > - political and intellectual environment; it is an offspring of "vested
> > interests" dressed up as "ideas" by revolving-door political and
> > academic opportunists.
> >
> > It is not by accident that I invoke these images from the final
> > paragraph of Keynes' General Theory - "...in the field of economic and
> > political philosophy there are not many who are influenced by new
> > theories after they are twenty-five or thirty years of age, so that the
> > ideas which civil servants and politicians and even agitators apply to
> > current events are not likely to be the newest.  But, soon or late, it
> > is ideas, not vested interests, which are dangerous for good or evil."
> >
> > For, having let "technical monetary details fall into the background" in
> > the General Theory, Keynes left contemporary "agitators" against
> > Globalization in general and 'Dollar Hegemony' in particular to fend for
> > themselves insofar as the "technical monetary" aspects of the problem
> > are concerned.  In this respect, as noted in a recent message, academic
> > critics of the interest rate and fiscal policy components of IMF
> > "stabilization programs" fail to recognize their own handiwork therein.
> >
> > I conclude, therefore,
> >
> > (a) that the starting point for reforming the global financial
> > architecture resides in "technical monetary details";
> >
> > (b) that the "technical" nature of the subject matter places it beyond
> > the reach of the empiricism which informs most (if not all) contemporary
> > academic work on monetary economics; and
> >
> > (c) that "technical monetary details" must be addressed through an
> > analytical approach akin to that used by Keynes in all his work on
> > monetary issues before the General Theory.
> >
> > Gunnar
> >
> >
> >
> >
> >
>
>