Jamaica Agreement 1973

In addition, there was a second big difficulty. A deliberate decision by the ministerial committee to give countries the right to choose the exchange rate agreements they prefer would have been one thing. But that is not at all what the ministers had in mind in March 1973 when they approved their communiqué. While some ministers, particularly the United States and the Germans, have increasingly advocated the introduction of flexible exchange rates for an indeterminate period, a large majority of ministers continued to advocate a rapid return to fixed exchange rates. Indeed, the solutions proposed in the structure for the other major problem, the future reserve system, are explicitly based on a system of parity. The fact that the float effectively stopped the unwanted cash explosion is closely related. As long as countries maintain a fixed exchange rate against an overvalued dollar, they had to buy the dollar – and after the suspension of convertibility in 1971, they add it entirely to their reserves at heights needed to maintain that price. Swimming has changed dramatically. Since general swimming in 1973, reserves in industrialized countries have remained roughly stable. The continued creation of liquidity, compared to the above, is due to a sharp increase in the reserves of OPEC countries and is therefore linked to a fundamentally temporary disruption of payments, the origin of which was foreign to the international monetary system. Finally, many technical changes to the articles were approved by the Executive Directors. While they do not fundamentally affect international monetary relations, they will significantly strengthen the Fund`s activities. One of the characteristics that can strengthen SDRs is that after the amendment, it can be used by mutual agreement among participants without the current formal “necessity requirement.” This brings SDRs closer to real money and can therefore have some influence on the system as a whole, although it is not enough, far from it, to make SDRs the “main asset of the system”.

Another feature of the technical amendments is the much broader application of enabling clauses that will allow the Fund to decide, by a majority of 85 per cent of the total voting rights, transactions and transactions that are described only in general terms in the Fund`s articles. However, it is not very likely that these enabling clauses will significantly affect the functioning of the monetary system. It is hoped, however, that they will make it easier for the Fund to adapt to changing circumstances. Whatever objections to the gold agreement, such as the huge unjustified increase in international liquidity and the extremely uneven distribution of gold gains, its non-pegging regime would have accelerated the phasing out of the monetary role of gold, but for paragraph 5, requiring countries to maintain these provisions for only two years. The fact that the United States has accepted this two-year limit is truly astonishing and surprised the international monetary community when it was known. In the end, the French insistence, faithfully supported by the American authorities, was required for the agreements to be implemented immediately after an agreement was finally reached. In order to solve the problem of gold purchases by central banks, the Bank for International Settlements, which is not bound by the Fund`s statutes, has been listed as an intermediary in the purchase and sale of gold. However, the BIS has stated that it does not intend to buy gold on its own behalf and it is not yet entirely certain that early implementation will not lead to difficulties or that there will be protests from Congress, which was particularly vulnerable last year, to scrupulous adherence to its prerogatives29. (less than 300 SDRs in 1973).

Bookmark the permalink.

Comments are closed