The topic of this book is the amount and nature of the reserves held by countries to meet occasions when they have to make payments to other countries. This might appear to be a technical question only, and one capable of being handled without too much difficulty by the financial authorities of the various countries. I believe, on the contrary, that this is a major problem, and indeed the most important problem confronting those responsible for economic affairs in the free world. It may well be that the success of the system of free enterprise (including ‘mixed economies’), as compared with that of totally planned economies, in promoting human welfare, depends more than on anything else on their success in dealing with this problem. A paradox! But paradoxes often express more profound truths than platitudes. It is the object of this first chapter to explain why this matter is important.
KeywordsCentral Bank Money Supply International Reserve Price Inflation Income Policy
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