Essay about Three Fundamental Complications of the International Monetary Program

The international economic system reveals three important problems. The first, which was outlined by David M. Keynes during the debates that led up to the Bretton Woods deals, is that the present international economic system contains a bias against countries running balance of payments deficits (Keynes, 1942-43). The countries in external surplus do not strong motivation to adjust, and so the burden of adjustment comes mainly on deficit countries. Adjustment does take place with a lag and rather quickly when deficit financing suddenly dries out. The uneven adjustment tends to generate a worldwide recessionary impact if the modifications that deficit countries have to adopt to balance their external ac¬counts do not find financing in adequate quantities, and if these adjustments are generally not offset by simply expansionary procedures in excessive countries. This problem can be called the anti-Keynesian tendency of the system. The second difficulty, which has turn into known as the Triffin dilemma, after the pioneering work by Robert Triffin (1961, 1968), comes from the fact that an international reserve system based upon a national currency (the U. T. dollar) has its own inherent instabilities. In particular, the only method that the remaining world can accumulate net assets in dollars is if the usa runs a balance of obligations deficit. Although that can result in a lack of confidence in the dollar. More often than not, this has resulted in strong periods in the worth of the key international money and in the U. S i9000. current account debt, which strongly affects the rest of the world economy. More generally, global monetary conditions are largely determined by the monetary insurance plan of the U. S., which can be designed with not any regard to its global repercussions. Based on the reformulation being a " general dilemma” by the late Padoa-Schioppa (2011, pp. 63-64), " the stability requirements of the program as a whole happen to be inconsistent with the pursuit of financial and economic policy forged solely within the...