The objectives of the international monetary system
The international monetary system does not close on itself. Its main function is to allow the fundamental economic processes of production and distribution to be carried out as smoothly and efficiently as possible. If A. Smith interpreted international trade as a wheel of human civilization, then the international monetary system performs in this case the function of lubrication in the bearings of this wheel. When this wheel rotates gently and smoothly, international currency relations become invisible, are taken for granted, since all the attention of researchers is focused on the growing flow of goods and services designed to meet the needs of the people in every corner of the world. But if the wheel of trade begins to rotate with greater friction, the international flow of goods and services may be reduced or even interrupted with corresponding negative consequences for the economic well-being of peoples. It is during such crises that most people learn about the existence (and meaning!) Of the international monetary system.
From the above it follows that the main objectives of the international system are:
- ensuring an effective division of labor between different economic systems of the world economy;
- the maximization of the total volume of world production and the level of employment of the population;
- ensuring sustainable economic growth of national economies;
- containment of inflation and maintenance of external economic balance;
- optimization of the welfare level of both different countries and different population groups within each country.
Stages of the development of the international monetary system
The evolution of the world monetary system is most significantly affected by the following factors:
- the level of development of commodity production;
- the degree of intensity of the international division of labor;
- the level of development of the world market;
- the degree of development of the world economic system.
In general, the nature of the functioning and stability of the international monetary system depends on the degree to which it corresponds to the state and structure of the world economy. In particular, with the change in the structure of the world economy and the balance of forces in the world arena, the existing form of the international monetary system is replaced by a new one. Appearing in the XIX century, the world monetary system has gone through three stages of evolution:
- gold standard (The Paris-Genoese system);
- The Bretton Woods system of fixed exchange rates;
- The Jamaican system of floating exchange rates.
Let's consider briefly all three stages of evolution.
Gold standard system. The first world currency system spontaneously formed in the XIX century. based on gold monometallism, i.e. providing the national currency with gold reserves of the treasury. The beginning of the operation of the gold standard economists refer to 1821, and legally it was formalized by an interstate agreement at the Paris Conference in 1867, which recognized gold as the only form of world money. Subsequently, many developed countries at that time abandoned the currency dualism (providing the currency with both gold and silver) and entered into the Paris Agreement. Russia did this in 1895-1897. the efforts of the then United States Finance Minister S. Yu. Witte.
Gold standard characterized by the following main features.
■ Each currency had a gold content, i.e. the currency unit was equated to a certain weight of gold.
■ In accordance with the gold content of currencies, their gold parities were set, i.e. exchange rates, mutual prices of currencies.
■ There was a convertibility of each currency into gold both inside and outside the borders of an individual state. The state was obliged to buy and sell the domestic currency for gold on demand and at parity cost. After paying a small commission, any person (both a resident of a given country and a foreigner) who came to the central bank could exchange paper money for gold and simply take it away with him.
■ Gold was used as generally accepted world money.
■ Free export and import of gold.
■ Maintaining a rigid relationship between the national gold reserve and the domestic supply of money. The state always had stocks of gold, at least equal in value to the amount of money issued in circulation.
The mechanism of international payments, based on the "gold standard" set a fixed rate (through the gold content corresponding to each currency).
While gold performed all the functions of money, and paper money was in fact its representatives and freely exchanged for gold in accordance with the official gold content indicated on them, difficulties in establishing exchange rates did not arise. They (exchange rates) were based on gold parity. So, if the currency is X was equal to 10 g of gold, and the monetary unit "U" - only 5 g, then the parity of the currency "X" to the currency, "Y", was naturally 0.5 "X" for 1.0 y .
Deviations of exchange rates from parity in such a currency system were possible, but in extremely limited limits. Indeed, if, for example, the currency exchange rate is "X" fell significantly below parity, then there was no sense in carrying out calculations in it. It was more expedient to convert it into gold, transport it to the country of currency, "U"; and buy this currency on it.
So, with the gold standard the national currencies were exchanged at a fixed exchange rate for gold, the amount of which was limited.
If the increase in the amount of money inside the country led to an increase in prices, this caused the outflow of gold from the country, and consequently, a reduction in the amount of money in circulation, which in turn caused a drop in prices and the restoration of equilibrium in the country.
The stability of the exchange rates ensured the reliability of cash flow forecasts of companies, the planning of their costs and profits, thus creating favorable conditions for economic growth and the development of international trade.
Gold Standard was and remains the most effective currency system in the history of the world economy, as most modern economists admit. It ensured, as it follows from the above, automatic convertibility of currencies on the basis of their gold parity, thereby simplifying international settlements and providing currency stability to the world economic system. It is no coincidence that the era of the "golden standard" called the golden age world economy. Paradoxically, the period of the most free development of capitalism (1870-1914), which history knew, was accompanied by fixed (seemingly non-market, non-free) exchange rates. Especially favorable is the "gold standard" influenced the international trade, which during this period has increased more than 10 times.
However, when using the gold standard many countries experienced quite serious economic difficulties, which eventually led to its destruction.
First, countries had to hold very large gold reserves, which was associated with significant government spending.
Secondly, the pace of economic development of the world economy began to outpace the physical volumes of gold mining. Maintaining the same gold circulation with a deficit of gold reserves causes a decline, the economy in such a situation simply suffocates.
In addition, the tight binding of the exchange rate to the gold parity limited the ability of countries to pursue an independent monetary policy, especially relevant since 1914, with the outbreak of the First World War. Since there were no formal agreements between individual countries to maintain unchanged gold prices, the governments of some countries, under pressure of internal circumstances, were going to change the gold equivalent of their currencies or even to stop their convertibility into gold.
These reasons, like some others, such as the inflation that occurred during the First World War, led to the fact that the "gold standard" collapsed.
The interwar period. If the gold-standard era of the period until 1914 is regarded as "golden" century international monetary relations, the interwar period can be considered as "dark" century, as an economic nightmare. With the outbreak of the First World War, the "golden" century, as already said, is over. Initially, belligerent countries suspended the convertibility of their currencies into gold and imposed an embargo on the export of gold to protect their gold reserves. Shortly thereafter, most other countries adopted the same policy and the classic gold standard died.
On the foreign exchange market, individuals could still exchange one paper currency for another, but at prices determined by the terms of supply and demand. Thus, the gold-standard system with a fixed exchange rate was followed by a fully floating exchange rate regime. By inertia, most countries viewed the regime of fluctuating exchange rates as a temporary phenomenon, trying to restore the classical gold standard, in particular at the international conference in Genoa in 1922. However, the system collapsed and nothing could collect it again.
The decade of the Great American Depression was the period of an open economic war between countries of the world economy. As depression intensified, governments vainly followed the game of competitive currency depreciation in the hope of eliminating domestic unemployment and restoring the external balance. During the five-year period (1931-1935) international cooperation reached its lowest point.
In 1936, a certain sign of cooperation appeared: Britain, France and the US signed a trilateral agreement that allowed France to devalue the inflated franc without reprisals. But this trace of cooperation was sharply interrupted by the Second World War: the international currency reform was postponed until the end of the war.
The Bretton Woods currency system. The drafting of a new world monetary system began during the Second World War under the leadership of the English economist JM Keynes. The second international monetary system received its legal registration at the International Monetary and Financial Conference in the small American town of Bretton Woods in 1944.
The ideologists of this system tried to restore the stability of exchange rates, which was one of the main advantages of the "gold standard", increasing the flexibility of their regulation by reducing the role and importance of gold in this process. To achieve this goal, they proposed a unique method of fixing exchange rates. Since the gold parities with the collapse of the "gold standard" were irretrievably rejected, parity exchange rates of currencies were proposed to be established and calculated in US dollars. The US dollar itself was exchanged if necessary for gold at a fixed price. It was, therefore, the introduction of the gold standard, based on gold and reserve currency (motto) - the US dollar.
The basic principles of the Bretton Woods monetary system were as follows.
■ For the dollar, the function of final monetary settlements between countries was preserved.
■ The reserve currency was the US dollar, which, along with gold, was recognized as a measure of the value of the currencies of different countries, as well as an international credit facility for payment.The dollar was exchanged for gold by central banks and government agencies of other countries in the US treasury at a rate of $ 35 per troy ounce (31.1 grams).
■ Currency exchange rates and their convertibility began to be realized on the basis of fixed parities, expressed in the US dollar, i.е. through cross-rates.
■ Each country was given the right to lower (devalue) or raise (revalue) the rate of its national currency.
■ Each country had to maintain a fairly stable, essentially fixed exchange rate of its currency relative to any other currency. Market exchange rates should not deviate from fixed gold or dollar parities by more than 1% in either direction. If the value of the currency of any country rises to the upper limit or falls to the lower limit, the central issuing bank of this country was obliged to intervene in the situation and stabilize the exchange rate of the national currency.
■ International monetary organizations were established: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). Interstate regulation of currency relations was to be carried out mainly through the IMF, designed to ensure compliance by member countries with official currency parities, exchange rates and free convertibility of currencies. The role of IBRD was originally to lend to the post-war reconstruction of a ruined Europe, then its main task was to provide investment loans to developing countries for the structural adjustment of their economies.
From the late 1940s to the early 1970s. The Bretton Woods currency system, based essentially on the dollar, quite successfully maintained fixed exchange rates. In this unique position among all other currencies was taken by the US dollar. The status of the only reserve currency allowed the United States to gratuitously gratuitously allocate a certain part of the world product, since all other countries agreed in exchange for their goods and services to receive newly issued dollars. This practice was called "free breakfasts". for the United States and has become one of the reasons for the subsequent collapse of this currency system.
The objective basis for the dollar's dominance in the post-war years was the unconditional economic superiority of the United States over the rest of the world. In the United States in 1949, for example, 54.6% of capitalist industrial production and 75% of gold reserves accounted for. Until the 1960s. As a result of the deficit of trade balances with the US, the rest of the countries experienced substantial "dollar hunger" and therefore the US dollar domination in these years was unbreakable.
However, by the end of the 1960s. As a result of the growing economic power and influence of the countries of Western Europe and Japan, their deficit trade balances with the United States have been replaced by balances with a surplus (surplus). Dollar famine was replaced by the "dollar satiety", American partners began to seek to exchange the accumulated dollar reserves for gold (at a fixed and low enough by the standards of that time, the price of gold).
The US dollar reserves outside the country amounted to a huge amount: the principle of the Bretton Woods currency system on the exchange of the dollar for gold was burdensome for the US, no gold liquidity was provided.
The credibility of the US dollar has been undermined.
In the end, in 1971, US President Richard Nixon refused to convert the dollar into gold at a fixed price. Thus, the Bretton Woods system in the early 1970s. actually collapsed and the main industrial countries allowed their exchange rates to fluctuate freely.
The Jamaican (modern) currency system. As early as 1972, when it became clear that the system of fixed exchange rates no longer suited the interests of the vast majority of countries, a special Committee on the Reform of the Currency System was established, following the results of which in January 1976, at the regular meeting of the International Monetary Fund in Kingston, Jamaica, the foundations of the modern world monetary system were determined. The essence of this system are floating exchange rates and a multicurrency standard.
The basic principles of the Jamaican currency system are as follows.
■ The functions of gold as a measure of value and a benchmark for exchange rates were abolished. Gold turned into an ordinary commodity with a free price on it. There was a demonetization of gold. However, as a reserve, gold continues to be used. Each country has a gold reserve, designed to provide its currency - monetary gold. In the case when it is necessary to support the national currency, the country sells part of the gold reserve at the market price in free markets.
■ Currency relations became polycentric, i.e. based not on one, but on several key currencies.
■ Countries were given the right to choose any exchange rate regime. Currency relations between countries began to take shape on the floating rates of their national monetary units. The fluctuations of the rates were due to two main factors:
- real value ratios, purchasing power of currencies in the domestic markets of countries;
- the ratio of supply and demand of national currencies in international markets. At the same time, in order to prevent erratic fluctuations in the exchange rate, IMF member countries are obliged to make every possible effort to maintain their finances in due order. In practice, this meant the introduction of a certain version of managed floating currencies of the respective countries.
■ Collective world money was introduced - SDRs - special drawing rights designed to replace gold and reserve currencies as the main means of global liquidity. Ideologists SDR planned to give this currency the function of a global means of payment, replacing all other reserve currencies. However, the practice showed that the SDR could not replace the dollar and other reserve currencies as a universal means of settlement - countries preferred certain currencies. Therefore, the IMF was able to conduct only a few SDR issues since 1970, and to date the share of the collective currency in the total reserves of IMF countries is 2-3%. The price of SDRs is determined on the basis of the basket of leading currencies in accordance with the share of each country in world exports.The role of the IMF as a regulator of monetary and financial relations is strengthened, supported by the expansion of the practice of allocating so-called stabilization loans to those countries whose currencies need support.
The Jamaican system was supposed to become more flexible than the Bretton Woods, and adaptable to the instability of exchange rates and balance of payments. However, this currency system also continues to experience crisis shocks periodically, which forces economists to search for ways to improve it in order to effectively solve the main currency problems of the world economic system.
At present, the world economic community is faced with the need to formulate conceptual principles for a new model of the international monetary regime, which should reflect the following main trends in the functioning of the modern world economic system.
■ Formation of several world currency poles with complete abandonment of the mono currency system of the monetary system.
■ A departure from the orientation toward free unlimited floating of national currencies and the strengthening of mutual influence on exchange rates, up to the implementation of joint currency interventions to maintain allowable fluctuations in the exchange rates of currencies.
■ Transfer of the center of gravity in the field of interstate monetary and financial regulation from purely monetary instruments to macroeconomic measures to coordinate the economic policies of different countries.
■ Liberalization of currency relations, the result of which will be the provision of total convertibility of currencies.
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