Plans for reform of the international monetary system

[Front Matter and Prefaces]: This segment contains the title pages, publication details, and prefaces to the first and second editions of Fritz Machlup's survey on international monetary reform. Machlup explains the pedagogical intent of the paper, its publication history in multiple languages, and the rapid evolution of economic conditions between 1962 and 1963 that necessitated a significantly expanded second edition. [Table of Contents and List of Tables]: A comprehensive table of contents and list of tables/T-accounts for the work. It outlines the structure of the paper, covering the present system's difficulties (balance of payments, reserve inadequacy), and a detailed selection of reform plans including the centralization of reserves, gold price increases, and flexible exchange rates. It also lists specific technical T-accounts for various economic plans like those of Keynes, Triffin, and Stamp. [Introduction to Monetary Reform Plans]: Machlup introduces the growing dissatisfaction with the contemporary international monetary order. He categorizes the various reform proposals into radical and conservative approaches, noting that the differences in these plans stem from varying objectives, perceived defects of the current system, and considerations of political feasibility among 'practical men'. [I. The Present System: Foreign Reserves and the IMF]: Machlup describes the mechanics of the gold-exchange standard and the role of the International Monetary Fund (IMF) in the early 1960s. He distinguishes between gold and currency reserves, explains the technical definitions of IMF drawing rights (gold vs. credit tranches), and discusses the accounting complexities of 'gross' versus 'net' reserves. The section includes detailed footnotes on the evolution of the gold-exchange standard and the reluctance of the United States to exercise its drawing rights. [Statistical Analysis of Global Monetary Reserves (1949-1962)]: This segment provides a comprehensive statistical overview of the growth, composition, and distribution of monetary reserves among the nations of the free world from 1949 to 1962. It includes Table 1 and Table 2, which track the relative shrinkage of the metallic nucleus of currencies and the shift in reserve shares from the United States to European nations like Germany, France, and Italy. Machlup analyzes the increasing reliance on U.S. dollar claims and the implications of these shifts for global liquidity. [II. Charges against the System: Balance of Payments and Liquidity]: Machlup categorizes the primary criticisms of the international monetary system into three problems: balance-of-payments difficulties (including speculative 'hot money' movements), the inadequacy of reserve growth relative to trade, and the fragility of the gold-exchange standard. He contrasts the modern system with the pre-1914 gold standard, noting how modern employment and growth policies prevent the traditional 'discipline' of interest rate adjustments. The section highlights the debate between those who see a liquidity shortage (Harrod) and those who fear inflationary excess (Jacobsson, Hawtrey). [III. A Selection of Plans: Extension of the Gold-Exchange Standard]: This section examines proposals to extend the existing gold-exchange standard, specifically through the adoption of additional key currencies (e.g., D-mark, French franc). Machlup analyzes the Roosa Plan (bilateral currency swaps), the Zolotas Plan (multi-currency standard with gold guarantees), and the Posthuma Plan (fixed gold-to-currency ratios in reserves). He uses T-Account Set 1 to demonstrate how international payments function within a multiple-currency-reserve system and discusses the risks of Gresham's Law when multiple international moneys are convertible at fixed rates. [Mutual Assistance among Central Banks]: Machlup details plans for mutual assistance between central banks, primarily to combat speculative capital outflows. He explains the 'General Arrangements to Borrow' and the role of the IMF as an intermediary and guarantor. Using T-Account Sets 2 and 3, he illustrates how support actions can fund short-term liabilities without requiring immediate deflationary adjustments. He distinguishes between 'basic-balance' trouble (requiring adjustment) and 'hot-money' trouble (suitable for compensatory financing), citing Hawtrey's warnings against using liquidity to mask fundamental disequilibrium. [Centralization of Monetary Reserves and Reserve Creation]: Machlup analyzes radical proposals to centralize world reserves into a 'central bank of central banks.' He compares the Keynes Plan (Bancor and overdrafts), the Triffin Plan (X.I.M.F. with autonomous reserve creation via open-market purchases), and the Stamp Plan (using reserve creation to finance aid to underdeveloped countries). He uses T-Account Sets 4, 5, and 6 to show how each plan creates reserves against different types of assets (overdrafts, negotiable securities, or development loans) and discusses the inflationary risks and flexibility of each approach. [Increase in the Price of Gold]: This section explores the proposal to increase the official price of gold to augment global liquidity. Machlup explains the mechanics of revaluing existing stocks (T-Account Sets 9 and 10) and the potential for increased annual gold production. He contrasts Harrod's view (using gold to supplement the gold-exchange standard) with Rueff and Heilperin's view (using it to abolish the gold-exchange standard). Machlup also introduces his own proposal for gradual gold price reductions to discourage hoarding, and discusses the risks of one-sided speculation and arbitrary income transfers to gold producers. [Freely Flexible Exchange Rates]: Machlup discusses the case for freely flexible exchange rates as a means to eliminate the need for international reserves. He argues that fixed rates are incompatible with autonomous national monetary policies focused on full employment and growth. The section lists numerous economists supporting flexibility (Friedman, Lutz, Meade, etc.) and addresses common objections regarding trade risks and the potential for inflation. Machlup concludes that fixed rates are only viable among countries with coordinated monetary policies, while flexible rates are necessary for those pursuing independent paths. He also touches on the potential demonetization of gold under such a system. [Bibliography and Publication List]: A comprehensive list of publications from the International Finance Section of Princeton University, including the Essays in International Finance, Princeton Studies in International Finance, and Special Papers in International Economics. The list covers works by prominent economists such as Nurkse, Harrod, Meade, and Machlup himself, spanning from 1943 to 1964.