The Elements of an International Monetary System

Abstract

It is the purpose of this and subsequent chapters to lay bare and examine the working of the international monetary system. In setting out the general principles of its operation there is a great and constantly growing body of theory, much of which is of recent vintage, for theory in this field has tended to follow and seek solutions to the great international monetary problems of the interwar and post-war periods. Some of this theory, such as the theory of the gold standard, is a carryover from the classical economics of the nineteenth century; some of it, as, for example, absorption theory, is an application in an international setting of the newer income theory of macro-economics which came to us from the Keynesian model of the domestic economy. Finally, some theory has been distilled from observation and a deepening understanding of international monetary institutions and currency systems. To approach this formidable array is a daunting task in which the only consolation is that probably no attempt to classify, codify, or simplify can be wholly adequate. The one which is followed in this and later chapters makes no effort to be encyclopaedic. It is pragmatic and aims at a wide view of the country. With a map of reasonable accuracy the student’s knowledge can be deepened by progressive exploration.