INTERNATIONAL FINANCIAL NEWS SURVEY - Address by the Managing Director of the International Monetary Fund

Sep 29, 2026

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INTERNATIONAL FINANCIAL NEWS SURVEY records a June 12, 1968 address delivered by the Managing Director of the International Monetary Fund to New York financial writers. The speech reviews troubled international monetary conditions, highlighting weaknesses in payments adjustment among major trading nations and the challenge of meeting future reserve needs. It explains why broader equilibrium in the U.S. balance of payments matters, and outlines the creation of special drawing rights to provide liquidity through a new, rational reserve mechanism.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages5

Reading Time13 min

AccessFree to download

Address Overview

Issues in the International Monetary Scene

Payments Adjustment and Reserve Needs

Creation of Special Drawing Rights Facility

# INTERNATIONALFINANCIAL NEWS SURVEY World Payments Problems Address by the Managing Director of the International Monetary Fund,Mr.Pierre-Paul Schweitzer,to the New York Financial Writers'Association,New York City,June 12,1968 It is a pleasure to be here this evening as the guestof the financial press in New York.Yet I mustconfess that yours is one business where I should notbe sorry to see some underemployment.On the prin-ciple that no news is good news,I shall be happier whenworld monetary affairs are less in the limelight. The international monetary scene is undeniablytroubled.Indeed it has been troubled for some consid-erable time as certain defects,actual or potential,inthe functioning of the system have been increasinglyexposed.Two aspects in particular have aroused con-cern.I am referring to the unsatisfactory record ofpayments adjustment among the main trading nationsduring this decade so far,and to the contentious prob-lem of finding a way to meet the future needs for thegrowth of reserves in an expanding world economy. Judged by the sustained increase in world trade andoutput over the last twenty years,the gold exchangestandard has served its purpose well.But the mode ofreserve creation under this system remained haphazardand unrelated to objective requirements.The roleplayed by sterling and U.S.dollars permitted economyin the use of gold.This was an important function,since the availability of that metal for monetary pur-poses was conditioned by the existence,discovery,andprofitable exploitation of gold mines as well as by thestrength of demand from other sources.Yet the supplyof national currencies in world reserves was dependenton the deficits of the countries of issue;and this builtinto the system a latent instability,for the sheer accu-mulation over time of other countries'sterling and dollarclaims in relation to the gold held by the reserve cur-rency centers was likely at some point to cause mis-givings.It could be expected that countries wouldbecome increasingly reluctant to add to such claims,and any tendency to liquidate them could create seriousstrains. In fact,the deficits of the United States from 1950onwards—though not those of the United Kingdom一were for many years welcome to the rest of the world,which was anxious to rebuild its external reserves.Thesubstantial growth of foreign dollar holdings and theredistribution of the vast gold stock held by the UnitedStates at the end of the war,together with an unex-pected but temporary surge in gold output,amply satis-fied the need for world liquidity.But the outflow ofdollars could not go on indefinitely without impairingthe system itself and threatening the continued momen-tum of the world economy.This is now a compelling reason for the restoration and maintenance of broadequilibrium in the U.S.balance of payments.Such anadjustment,however,would in itself curtail the growthof world reserves.Sooner or later the emergence ofreserve stringency could be expected to reverse thebeneficial movement toward trade liberalization and todiminish the flow of financial resources to developingcountries.The cumulative impact need hardly bespelled out. It was recognition of this potential dilemma that ledto concrete action to ensure that international reserverequirements would be met in a rational manner froma new source when the need arose.It is not,I think,necessary to trace the course of the preceding discus-sions,which were stimulated by academic economistsand conducted for more than four years among theGroup of Ten and in the Fund.Suffice to say that inApril the Executive Directors of the Fund sent to theBoard of Governors a detailed scheme,in the form ofproposed amendments to the Articles of_Agreement,providing for the establishment in the Fund of thespecial drawing rights facility.The amendments wereapproved by the Board of Governors when the voteswere tallied at the end of May and are now waiting tobe accepted by member governments,a process whichin mo

FAQs

What two major problems does the speech identify in the international monetary system?

It points to the unsatisfactory record of payments adjustment among major trading nations and the contentious problem of meeting future reserve needs in a growing world economy.

Why is restoring balance in the U.S. balance of payments considered urgent?

Because continued dollar outflows could impair the system and threaten the momentum of the world economy, making broader equilibrium necessary.

How will special drawing rights be established and what is their purpose?

The Fund’s amendments to the Articles provide for a special drawing rights facility. After acceptance by member countries and required quota-based participation deposits, the facility will provide a new fiduciary asset to support reserve growth and exchange stability.

Sep 29, 2026

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