Dear friends,
I would like to add this speech to my previous message:
“Why
should we have listened better to
Robert Triffin?”
Speech by Jan Joost Teunissen at
conference, “The economic
and financial crisis of 2008-09”, Louvain-la-Neuve, 7-8 May 2009
There are various reasons why we
should have listened better to Robert Triffin’s suggestions of how to fundamentally reform and
improve the functioning of the international monetary system. He made those suggestions
for the first time in 1957, in his Europe
and the Money Muddle, and
continued making them until a year before his death in 1993,
when he withdrew from all public economic
activities. I will discuss two major reasons, the first
concerned with the world economic and political
system, and the second with the role of economists.
A more stable system plagued less by crises
The first and main reason why we
should have listened better to Robert Triffin’s suggestions for reform and improvement of the
international monetary system is that the world would have been more stable and would
have been plagued less by crises. Those crises have proven to be very harmful for businesses
and citizens.
In 1985, three years after the
world debt crisis broke out in Latin America, and led to what Latin Americans have called ‘the
lost decade’, Triffin once again advocated fundamental reform of the international
monetary system, just like he had done energetically during the sixties and seventies. He did so
in a report that he prepared for a US Congressional Summit on Exchange Rates and the Dollar.
He said, and I quote, “We should resume negotiations for a fundamental reform
of the world monetary system - or non-system - that is anchored primarily on a national,
paper reserve currency, that is, the dollar.”
In the view of Triffin, a key
element of such fundamental reform would be to anchor the system on a truly
international reserve asset held
with the IMF, and not on the dollar or any other national currency used as a
reserve currency. Triffin mentioned three major arguments why fundamental reform of the
system was needed.
First, and I quote his 1985 paper
prepared for the US Congressional Summit, “because of its fantastic inflationary proclivities,
leading to world reserve increases eight times as large over a brief span of fifteen years as
over all previous years and centuries since Adam and Eve.”
Second, “because of its skewed
investment pattern of world reserves,
making the poorer and less capitalized countries of the
Third World the main reserve lenders, and the richer and more capitalized industrial
countries the main reserve borrowers of the system.” In another paper Triffin said the same in
stronger words. I quote from his September 1988 acceptance speech of the Seidman Award, “the
richest, most developed, and most heavily capitalized country in the world should not
import, but export, capital, in order to increase productive investment in poorer, less
developed, and less capitalized countries. I have long argued
that our international monetary system
is at the root of this absurdity.”
And third, “because of its crisis-prone
propensities reflected in the
amplitude of the present world debt problem.” ...
TO READ FURTHER, see the attached.
