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The gold-exchange idea that was devised at Bretton Woods has been so badly shaken that it cannot survive. Says Robert Triffin, a leading international money expert and a member of TIME's Board of Economists: "Perhaps the best thing about the Nixon economic package is that it has at last brought into the open the need for reform. Finally the world has been forced to look the problem in the face, instead of trying to patch up the system." Local Supremacy. In the chancelleries and the countinghouses, there is much talk of bringing more flexibility to the system. One way would be to introduce—in the jargon of the moneymen—"wider bands" for currencies. Instead of being able to move up or down only 1% from their officially stated values, currencies would be able to fluctuate within the range of, say, 2% or 4%. In that way, they could temporarily rise or fall in value without forcing nations to make wrenching official revaluations or devaluations.
Nations also need a new medium of exchange to replace the dollar as the world's central reserve currency. Says Triffin: "The world is now moving toward a new system in which neither the dollar nor gold will play the key roles that they have in the past. In the long run, the dollar will be supreme in its trading area, which includes Latin America and Canada, and European currencies will be supreme in the Common Market."
Another Keynes. Economists and finance ministers are also discussing a system by which all industrial nations would contribute some of their own currencies and gold to the IMF, which would then create and administer a sort of "supermoney." It would not take the form of paper bills but, like the IMF's current Special Drawing Rights, would simply be a bookkeeping supplement to the existing gold supply.
The supermoney would expand automatically as the world's need for trading currency expands—something neither gold nor S.D.R.s now do. And because the supermoney would be backed by many nations, it could not be undermined by the economic policies of any one nation. For years the strength of the dollar has been steadily undermined by the U.S.'s inflationary policies.
It is clear that the dollar has ceased to be the most prized currency, and that the world is at a monetary turning point. At Bretton Woods in 1944, the prescient John Maynard Keynes proposed the creation of an international body that would issue and regulate an international money—something like a world central bank dispensing super-money. Economists are saying wistfully that the world needs another Keynes. Until he comes along, the original Keynesian idea is as good as any on which to build.
Internationalism or Isolationism
The hidden danger in the latest world monetary crisis is that if it is not resolved quickly and well, the world could tumble into a period of economic isolationism.
The now-shaky monetary system has served nations well for most of the past quarter-century, spurring the movement toward internationalism in economic affairs. It has led to a huge growth in world trade, to the free exchange of currencies and to the rapid expansion of multinational corporations.