by Hunold
[Publisher's Preface and Front Matter]: The publisher's preface introduces a collection of essays by international experts on the convertibility of European currencies in 1954. It emphasizes the scientific and practical value of the work for understanding upcoming political decisions in Germany and Great Britain regarding monetary stability and economic liberalization. [Foreword by Albert Hunold]: Albert Hunold provides a historical overview of economic systems, contrasting the spontaneous order of the market with state-led planning. He traces the cycles of mercantilism, liberalism, and the rise of Marxist planning, arguing that the post-war era is at a turning point where currency convertibility is the key to dismantling the 'neomercantilist' ruins and restoring international trade. The volume is dedicated to Luigi Einaudi on his 80th birthday. [Currency Convertibility: Introduction and Definitions]: Gottfried Haberler introduces the problem of currency convertibility as a central conflict between proponents of planned economies and liberal economists. He defines modern convertibility not as a return to the gold standard for individuals, but as the right to exchange currency at prevailing rates. He distinguishes between different types of convertibility based on the holder (resident vs. non-resident), the origin of funds (old vs. new debt), and the purpose (current transactions vs. capital transfers). [The Necessity of Convertibility and the 1947 Failure]: Haberler argues that convertibility is essential for maximizing global production through the division of labor and for preventing the creep of state bureaucracy into free markets. He analyzes the failed 1947 British experiment with convertibility, attributing its collapse to suppressed inflation, overvalued exchange rates, and unblocked sterling balances. He concludes that for convertibility to succeed, countries must avoid inflation and consider flexible exchange rates to absorb economic shocks without resorting to deflation or unemployment. [American Tariffs and Currency Convertibility]: This section examines the relationship between American trade policy and the restoration of European currency convertibility. The author argues that while lowering US tariffs and simplifying customs formalities would facilitate convertibility, it is not an absolute prerequisite. He critiques the 'productivity gap' theory, which suggests that superior American productivity makes balanced trade impossible without discrimination. Invoking the principle of comparative advantage, he explains that international trade depends on relative rather than absolute costs, and that wage levels naturally adjust to reflect productivity differences. He concludes that a country's balance of payments depends primarily on its own monetary and fiscal discipline rather than external factors like the speed of American technological progress. [The Favorable Moment for Introducing Convertibility]: The author identifies the early 1950s as a highly favorable window for restoring convertibility due to rising gold and dollar reserves outside the US and the stabilization of European currencies. He advocates for flexible exchange rates to facilitate this transition, particularly for the Sterling block. He notes a tension between the 'enthusiasm' for liberal economic policy on the European continent (led by West Germany's Ludwig Erhard) and the more hesitant approach of the British government under Churchill, arguing that British leadership remains essential for a successful global return to convertibility. [Convertibility in the Event of a US Economic Downturn]: This segment addresses European fears that a US recession would trigger a dollar shortage and collapse any system of convertibility. The author argues that the world economy is much more resilient than it was in 1949 due to higher reserves and increased production capacity outside the US. He strongly advocates for flexible exchange rates as the primary mechanism to absorb external shocks, contrasting this with the 'clumsy' method of direct import restrictions favored by planners like Hugh Gaitskell. He posits that a devaluation in response to a US downturn would be non-inflationary in the current climate and would naturally balance trade through the price mechanism. [The European Payments Union (EPU) and the Sterling Block]: The author analyzes the role of regional monetary organizations like the European Payments Union (EPU) and the Sterling block. While acknowledging their utility in facilitating multilateral trade during the post-war recovery, he argues that regional convertibility is inherently inferior to global convertibility. He suggests that once general convertibility is achieved, the EPU will become redundant. In contrast, the Sterling block may persist as a framework for policy coordination and reserve management, similar to its pre-war function, provided it does not remain a tool for discrimination against the dollar zone. [Currency Convertibility as a Realizable Goal]: Per Jacobsson defines convertibility as the ability to buy foreign currency without a license, emphasizing that it is an inseparable part of a free market economy. He critiques the failed 1947 attempt to restore the pound's convertibility, noting that one cannot liberalize currency while keeping other sectors of the economy under state control. He reviews the official shift toward convertibility in international bodies like the OEEC and the Randall Commission, and highlights the psychological and economic importance of Ludwig Erhard's advocacy for a free monetary system. [The Strategic Importance of Convertibility for Europe and the US]: Jacobsson outlines the specific benefits of convertibility for different regions. For Continental Europe, it is essential for encouraging savings and ensuring access to global raw materials. For Britain, it is the 'pillar' that holds the Sterling area together and maintains London's status as a financial center. For the United States, convertibility is the only way to ensure long-term export markets without perpetual foreign aid, as it enforces 'non-discrimination.' Finally, he argues that convertibility is a bulwark against totalitarianism, as exchange controls are a primary tool of state command economies. [Current Improvements in the Global Monetary Situation]: Jacobsson lists seven empirical signs that the global economy is ready for convertibility, including the $3 billion increase in non-US gold reserves, the convergence of black market and official exchange rates, and the return of the gold price to $35 per ounce. He emphasizes the success of flexible credit policies in countries like West Germany and Austria, which have seen capital inflows despite being occupied. He warns, however, that these gains are currently supported by temporary factors like US military aid and remaining discrimination against dollar goods, which must be addressed through 'parallel action' in both debtor and creditor nations. [Requirements for Creditor Nations and the Role of the US]: The final part of Jacobsson's essay focuses on the responsibilities of the United States as the world's primary creditor. He calls for a simplification of US customs, the abolition of 'escape clauses' that create uncertainty for exporters, and a gradual reduction of tariffs. He suggests the creation of 'convertibility funds' by central banks to stabilize markets during crises, rather than relying on taxpayer-funded aid. Referencing Keynes's post-war predictions, he argues that the current environment of US budget deficits and cheap money actually makes it easier for other countries to earn dollars, presenting a unique opportunity to restore the gold-standard-like stability of the pre-1914 era. [Orientation: The Dilemma of Transition from Command to Market Economy]: Röpke discusses the psychological and structural difficulties of transitioning from a foreign exchange control system (command economy) to a market-based order. He highlights a dilemma where the specialists managing complex organizations like the EPU (EZU) or the Coal and Steel Community have a vested interest in maintaining the status quo, making objective decisions about returning to market mechanisms difficult. [The Urgency of Restoring Convertibility]: The author argues that the moment for decisive action toward currency convertibility has arrived, citing seven specific reasons. These include the demoralizing effect of delay, favorable current economic conditions, the need to unblock international payments for expansion, preventing a return to inflationary financing, and ensuring that European integration follows a market-oriented rather than dirigiste path. He specifically emphasizes Germany's role following the recent Bundestag elections as a stable foundation for these reforms. [The Political Decision and Monetary Discipline]: Röpke frames convertibility as a political leap of faith similar to Germany's 1948 currency reform, requiring trust in market self-healing forces backed by monetary discipline. He argues that convertibility is not a sign of 'looseness' but rather the external counterpart to internal stability; a currency that remains restricted by exchange controls is inherently 'sick' regardless of internal anti-inflation efforts. [Germany's Role and the Definition of Convertibility]: The text examines Germany's unique responsibility to lead the return to convertibility as a way to rectify past errors in spreading exchange controls. Röpke defines the goal as the total abolition of exchange controls, citing Canada's 1951 decree as a model. He insists that 'true' convertibility must include the end of quantitative trade restrictions, returning to classical instruments like interest rate policy and reserve management. [Critique of the British Plan for External Convertibility]: Röpke critiques the British proposal for 'external convertibility,' which allows non-residents to convert currency while maintaining exchange controls for residents. He labels this 'convertibility without tears,' arguing it allows governments to avoid necessary internal reforms and monetary discipline. He suggests this model is a dead end that protects dirigiste interests and threatens the progress of the EPU (EZU). [The Swiss Model vs. the British Approach]: The author contrasts the British approach with the Swiss model, which grants full convertibility to residents while restricting it for non-residents from non-convertible countries. This 'Swiss way' is presented as a superior, staged method that allows a country to maintain market freedom internally while protecting itself from exploitation by 'soft currency' nations, all while remaining compatible with the EPU framework. [The Crisis of the EPU and the Problem of Capital Flight]: Röpke analyzes the structural flaws of the EPU (EZU), where disciplined nations like Germany effectively subsidize the inflationary policies of others. He then addresses the fear of 'capital flight,' arguing it is often overestimated. He contends that a sound internal credit policy and the restoration of a currency's 'goodwill' through freedom are the best defenses against capital flight, rather than the 'mousetrap' of exchange controls. [International Liquidity and the Role of the United States]: The final section of this chunk discusses the necessity of international liquidity and currency reserves. Röpke argues that a free capital market reduces the need for massive reserves. He suggests that US aid should support integral convertibility rather than limited plans. Finally, he proposes that a significant increase in the price of gold (from $35 to $50-60) would be the most effective way for the US to restore global liquidity and end the post-WWI errors of gold valuation. [Guidelines for an Action Program: National Responsibility and Collective Action]: This section outlines the fundamental principles of an action program for returning to currency convertibility. The author argues that 'convertibility begins at home,' emphasizing that national economic stability and non-inflationary market policies are prerequisites for international success. While collective action is preferred over individual efforts to rebuild a functional international monetary system, the author criticizes the European Payments Union (EPU) for its structural flaws and its tendency to shield undisciplined economies. The text advocates for a 'club of convertible currencies' led by economically stable nations to exert pressure on others to adopt monetary discipline. [The Failure of the EPU and the Path Toward a Convertible Club]: The author examines why the European Payments Union (EPU) has failed to lead countries toward full convertibility, characterizing it as a 'emergency apparatus' that has become a permanent crutch for debtor nations. He proposes several tiers of solutions, ranging from an ideal global 'Club of Convertible Currencies' involving the US and GATT-like trade ethics, to a more realistic 'core' group of stable European nations (Switzerland, Belgium, Netherlands, West Germany, Austria) that could break the ice by establishing integral convertibility among themselves. The section also addresses the complex relationship between this potential core group, the remaining EPU members, and the British sterling block. [Minimum Requirements and the Moral Imperative Against Exchange Controls]: This section discusses the immediate steps individual countries like Germany should take if collective European action fails, including the liberalization of the dollar zone and the removal of travel currency restrictions. The author shifts to a strong moral and philosophical critique of exchange controls (Devisenzwangswirtschaft), labeling them as 'collectivist foreign bodies' in a free market order. He argues that maintaining such controls is a sign of 'nationalized insolvency' and a 'police state' mentality, asserting that the return to convertibility is not merely a technical issue but a fundamental question of social and economic philosophy. [The Convertibility of the Italian Lira: Legislative Framework]: Authored by Guido Carli, this section details the evolution of Italian foreign exchange legislation between 1946 and 1950. It describes the transition from a centralized, bureaucratic control system to a more decentralized model where banks manage foreign exchange transactions. Key objectives included aligning the Lira's exchange rate with its purchasing power through free negotiations and automating the allocation of foreign currency for imports. The text lists specific legislative decrees that facilitated this shift toward a more market-oriented exchange system. [Italian Balance of Payments and the Risks of Convertibility]: Guido Carli analyzes the practical challenges Italy faces regarding full convertibility, specifically focusing on the structural deficit in the balance of payments. While Italy has moved toward liberalization within the EPU framework, Carli expresses caution about the liquidation of the EPU. He provides statistical tables for 1950-1954 showing the trade deficit, the role of 'invisible' earnings (tourism and off-shore contracts), and the depletion of reserves. He concludes that for convertibility to work without causing instability, international institutions must be transformed to provide sufficient credit in convertible currencies to manage fluctuating exchange rates. [The Gradual Method and Italian Economic Cooperation]: This segment discusses the impact of reorganizing the European Payments Union (EPU) on Italy's economic position. It argues that a gradual approach to convertibility through the EPU would facilitate Italy's continued participation in European economic cooperation, whereas a sudden liquidation of the Union might force Italy into bilateral trade agreements with non-convertible currency states, reversing the progress of economic integration. [The Convertibility of the Belgian Franc]: F. Collin provides a comprehensive analysis of the Belgian franc's path toward convertibility. He traces the history of exchange controls from 1940 through the post-war recovery, detailing the 'liberal dirigisme' practiced by the Belgian-Luxembourg Exchange Institute. The text examines Belgium's high export dependency, its relationship with the EPU and the dollar zone, and the technical requirements for a full return to convertibility, including price stability, labor cost comparisons with neighbors (especially the Netherlands and Germany), and the necessity of liberalizing capital movements alongside current payments. [The Convertibility of the French Franc]: Henry Germain-Martin analyzes the challenges and prospects for the convertibility of the French franc. He defines monetary internationalism and reviews the history of the franc from the 1914 gold standard to the post-WWII regime of exchange controls. The essay argues that convertibility requires internal fiscal discipline (balancing the budget), structural economic reforms to increase productivity, and an alignment of French prices with international levels. It also discusses France's debtor position within the EPU and the psychological importance of the private gold market in restoring confidence in the currency. [Swiss Foreign Trade Policy and the Crisis of Balance of Payments]: H. Homberger examines Switzerland's unique position as a hard-currency nation within a Europe dominated by exchange controls. He details the defensive use of clearing agreements to protect Swiss exports and the subsequent transition to the European Payments Union (EPU). Homberger argues against 'totalitarian internationalism' in trade liberalization, defending Switzerland's right to protect vital sectors like agriculture (the 'three-phase system'). He concludes that while Switzerland supports European solidarity and the return to convertibility, it must maintain its sovereignty over internal economic order and be wary of international automatisms that ignore national specificities. [Sterling Convertibility: Introduction]: A brief introductory segment for a discussion on the convertibility of the British pound sterling, focusing on the degree to which authorities can increase convertibility without a comprehensive agreement with the United States. [The Meaning of Convertibility for the Pound Sterling]: The author defines the concept of convertibility in the context of the British Pound, distinguishing between a total revolution of controls and partial liberalization. He outlines six critical dimensions for analyzing convertibility: the target currency (primarily the US Dollar), the categories of beneficiaries (UK residents, Sterling Area members, or non-resident holders), the origin of funds (old vs. new balances), the purpose of payment (current vs. capital account), the relationship between financial and commercial liberalization, and the choice between fixed or flexible exchange rates. [The European Payments Union and Sterling Convertibility]: This section examines the technical and systemic challenges that non-resident convertibility of the Pound would pose to the European Payments Union (EPU). The author argues that making the Pound convertible would likely turn Britain into a permanent creditor within the EPU, potentially forcing other European currencies to become as 'hard' as the dollar or rendering the EPU mechanism obsolete for Sterling transactions. [Competing Demands on the British Balance of Payments]: Meade discusses the trade-offs Britain faces when allocating its limited balance of payments strength. He argues that non-resident convertibility must compete with other priorities, such as relaxing import restrictions for UK residents to maintain industrial productivity and supporting economic development within the Commonwealth and Sterling Area. He warns against prioritizing foreign holders of Sterling at the expense of domestic economic health or political relations with the US. [The Necessity of Caution: Reserves and Volatility]: The author advocates for extreme caution regarding convertibility due to the inadequacy of London's gold and dollar reserves compared to pre-war levels. He analyzes the structural reasons for volatility in the British balance of payments, including speculative capital movements ('leads and lags'), inventory fluctuations of raw materials, and the sensitivity of the Sterling Area to US economic cycles. He notes that without a clear commitment to trade liberalization from the United States, unilateral British moves toward convertibility are risky. [The Pound as an International Currency and the Problem of Cheap Sterling]: The final section of this chunk addresses the Pound's role as an international medium of exchange and the resulting difficulties in maintaining exchange controls. Using a hypothetical example involving 'Entrepotica' and 'Sterlaria', the author explains the phenomenon of 'cheap sterling' and 'commodity shunting' (shunting trade), where goods are diverted to dollar markets to bypass currency restrictions. He suggests that while convertibility would eliminate these distortions, it should be paired with commercial controls to prevent a drain on reserves while maintaining inter-European trade liberalization. [Schlußfolgerungen zur Sterlingkonvertibilität]: Hunold concludes his analysis of Sterling convertibility, weighing the risks of a unilateral move against the benefits of international agreement. He outlines four defensive measures Britain would need in the event of an American economic downturn: using reserves, allowing a lower pound value to attract speculators, intensifying domestic controls, and coordinating with non-dollar countries to discriminate against dollar products. [Die Währung der Bundesrepublik Deutschland auf dem Weg zur Konvertibilität]: F. W. Meyer analyzes West Germany's transition toward currency convertibility following the 1951 balance of payments crisis. He details the progressive liberalization of imports within the OEEC and EPU frameworks, the accumulation of gold and foreign exchange reserves by the Bank deutscher Länder, and the dismantling of central planning mechanisms in the foreign exchange sector. [Lockerung der Devisenbewirtschaftung und Transferregelungen]: The text describes specific technical relaxations of German foreign exchange controls, including the extension of currency holding periods, simplified import procedures, and the liberalization of travel currency. It also covers the transition from 'Sperrmark' (blocked marks) to transferable accounts and the impact of the London Debt Agreement on capital transfers. [Marktwirtschaftlicher Zahlungsbilanzausgleich und die Risiken der Konvertibilität]: Meyer argues that true convertibility requires a commitment to a market-based system of balance of payments adjustment rather than administrative force. He warns against the 'convertibility swing' (Konvertibilitätsschaukel) and emphasizes that monetary policy must be primarily oriented toward balance of payments requirements, rejecting the idea that flexible exchange rates allow for total national credit autonomy. [Die Niederlande auf dem Wege zur Konvertibilität]: S. Posthuma details the economic recovery of the Netherlands after 1945. He describes the initial chaos, the monetary reform led by Lieftinck to absorb excess liquidity, the role of the Marshall Plan in bridging the dollar gap, and the gradual liberalization of trade through Benelux and the EPU. The section includes detailed statistical tables on money supply, gold reserves, and national income. [Statistischer Anhang: Niederlande 1945-1953]: A comprehensive set of statistical tables (1-10) documenting the Dutch economy from 1945 to 1953. Data points include the ratio of money supply to national income, the development of blocked funds, gold and foreign exchange reserves of the Netherlands Bank, investment and savings rates, and unemployment figures. [Theoretische Überlegungen zur Inländer- und Ausländerkonvertibilität]: Posthuma discusses the theoretical and practical definitions of convertibility. He distinguishes between 'internal' (resident) and 'external' (non-resident) convertibility and explores the risks of flexible exchange rates. He emphasizes that convertibility is not just a monetary goal but a means to achieve an optimal international division of labor, requiring coordination between the US, the Sterling area, and Continental Europe. [Schlußbetrachtung: Die Konvertibilitätsdiskussion]: Friedrich A. Lutz provides a concluding synthesis of the volume's arguments. He identifies the two main points of contention: the priority between resident vs. non-resident convertibility, and the choice between fixed vs. flexible exchange rates. Lutz argues that flexible exchange rates are a necessary mechanism for achieving balance of payments equilibrium without resorting to deflation or trade restrictions. [Anhang: Namenregister und Sachregister]: A comprehensive name and subject index for the entire volume. The name register includes prominent figures like Adenauer, Erhard, Keynes, and Röpke. The subject register covers topics from 'Abwertung' (devaluation) to 'Zwangswirtschaft' (command economy). [Biographische Notizen und Verlagsanzeigen]: Biographical sketches of the contributors (Haberler, Jacobsson, Carli, Collin, Germain-Martin, Homberger, Meade, Meyer, Posthuma, Röpke, Lutz) and advertisements for other volumes in the 'Volkswirtschaftliche Studien' series published by Eugen Rentsch Verlag.
The publisher's preface introduces a collection of essays by international experts on the convertibility of European currencies in 1954. It emphasizes the scientific and practical value of the work for understanding upcoming political decisions in Germany and Great Britain regarding monetary stability and economic liberalization.
Read full textAlbert Hunold provides a historical overview of economic systems, contrasting the spontaneous order of the market with state-led planning. He traces the cycles of mercantilism, liberalism, and the rise of Marxist planning, arguing that the post-war era is at a turning point where currency convertibility is the key to dismantling the 'neomercantilist' ruins and restoring international trade. The volume is dedicated to Luigi Einaudi on his 80th birthday.
Read full textGottfried Haberler introduces the problem of currency convertibility as a central conflict between proponents of planned economies and liberal economists. He defines modern convertibility not as a return to the gold standard for individuals, but as the right to exchange currency at prevailing rates. He distinguishes between different types of convertibility based on the holder (resident vs. non-resident), the origin of funds (old vs. new debt), and the purpose (current transactions vs. capital transfers).
Read full textHaberler argues that convertibility is essential for maximizing global production through the division of labor and for preventing the creep of state bureaucracy into free markets. He analyzes the failed 1947 British experiment with convertibility, attributing its collapse to suppressed inflation, overvalued exchange rates, and unblocked sterling balances. He concludes that for convertibility to succeed, countries must avoid inflation and consider flexible exchange rates to absorb economic shocks without resorting to deflation or unemployment.
Read full textThis section examines the relationship between American trade policy and the restoration of European currency convertibility. The author argues that while lowering US tariffs and simplifying customs formalities would facilitate convertibility, it is not an absolute prerequisite. He critiques the 'productivity gap' theory, which suggests that superior American productivity makes balanced trade impossible without discrimination. Invoking the principle of comparative advantage, he explains that international trade depends on relative rather than absolute costs, and that wage levels naturally adjust to reflect productivity differences. He concludes that a country's balance of payments depends primarily on its own monetary and fiscal discipline rather than external factors like the speed of American technological progress.
Read full textThe author identifies the early 1950s as a highly favorable window for restoring convertibility due to rising gold and dollar reserves outside the US and the stabilization of European currencies. He advocates for flexible exchange rates to facilitate this transition, particularly for the Sterling block. He notes a tension between the 'enthusiasm' for liberal economic policy on the European continent (led by West Germany's Ludwig Erhard) and the more hesitant approach of the British government under Churchill, arguing that British leadership remains essential for a successful global return to convertibility.
Read full textThis segment addresses European fears that a US recession would trigger a dollar shortage and collapse any system of convertibility. The author argues that the world economy is much more resilient than it was in 1949 due to higher reserves and increased production capacity outside the US. He strongly advocates for flexible exchange rates as the primary mechanism to absorb external shocks, contrasting this with the 'clumsy' method of direct import restrictions favored by planners like Hugh Gaitskell. He posits that a devaluation in response to a US downturn would be non-inflationary in the current climate and would naturally balance trade through the price mechanism.
Read full textThe author analyzes the role of regional monetary organizations like the European Payments Union (EPU) and the Sterling block. While acknowledging their utility in facilitating multilateral trade during the post-war recovery, he argues that regional convertibility is inherently inferior to global convertibility. He suggests that once general convertibility is achieved, the EPU will become redundant. In contrast, the Sterling block may persist as a framework for policy coordination and reserve management, similar to its pre-war function, provided it does not remain a tool for discrimination against the dollar zone.
Read full textPer Jacobsson defines convertibility as the ability to buy foreign currency without a license, emphasizing that it is an inseparable part of a free market economy. He critiques the failed 1947 attempt to restore the pound's convertibility, noting that one cannot liberalize currency while keeping other sectors of the economy under state control. He reviews the official shift toward convertibility in international bodies like the OEEC and the Randall Commission, and highlights the psychological and economic importance of Ludwig Erhard's advocacy for a free monetary system.
Read full textJacobsson outlines the specific benefits of convertibility for different regions. For Continental Europe, it is essential for encouraging savings and ensuring access to global raw materials. For Britain, it is the 'pillar' that holds the Sterling area together and maintains London's status as a financial center. For the United States, convertibility is the only way to ensure long-term export markets without perpetual foreign aid, as it enforces 'non-discrimination.' Finally, he argues that convertibility is a bulwark against totalitarianism, as exchange controls are a primary tool of state command economies.
Read full textJacobsson lists seven empirical signs that the global economy is ready for convertibility, including the $3 billion increase in non-US gold reserves, the convergence of black market and official exchange rates, and the return of the gold price to $35 per ounce. He emphasizes the success of flexible credit policies in countries like West Germany and Austria, which have seen capital inflows despite being occupied. He warns, however, that these gains are currently supported by temporary factors like US military aid and remaining discrimination against dollar goods, which must be addressed through 'parallel action' in both debtor and creditor nations.
Read full textThe final part of Jacobsson's essay focuses on the responsibilities of the United States as the world's primary creditor. He calls for a simplification of US customs, the abolition of 'escape clauses' that create uncertainty for exporters, and a gradual reduction of tariffs. He suggests the creation of 'convertibility funds' by central banks to stabilize markets during crises, rather than relying on taxpayer-funded aid. Referencing Keynes's post-war predictions, he argues that the current environment of US budget deficits and cheap money actually makes it easier for other countries to earn dollars, presenting a unique opportunity to restore the gold-standard-like stability of the pre-1914 era.
Read full textRöpke discusses the psychological and structural difficulties of transitioning from a foreign exchange control system (command economy) to a market-based order. He highlights a dilemma where the specialists managing complex organizations like the EPU (EZU) or the Coal and Steel Community have a vested interest in maintaining the status quo, making objective decisions about returning to market mechanisms difficult.
Read full textThe author argues that the moment for decisive action toward currency convertibility has arrived, citing seven specific reasons. These include the demoralizing effect of delay, favorable current economic conditions, the need to unblock international payments for expansion, preventing a return to inflationary financing, and ensuring that European integration follows a market-oriented rather than dirigiste path. He specifically emphasizes Germany's role following the recent Bundestag elections as a stable foundation for these reforms.
Read full textRöpke frames convertibility as a political leap of faith similar to Germany's 1948 currency reform, requiring trust in market self-healing forces backed by monetary discipline. He argues that convertibility is not a sign of 'looseness' but rather the external counterpart to internal stability; a currency that remains restricted by exchange controls is inherently 'sick' regardless of internal anti-inflation efforts.
Read full textThe text examines Germany's unique responsibility to lead the return to convertibility as a way to rectify past errors in spreading exchange controls. Röpke defines the goal as the total abolition of exchange controls, citing Canada's 1951 decree as a model. He insists that 'true' convertibility must include the end of quantitative trade restrictions, returning to classical instruments like interest rate policy and reserve management.
Read full textRöpke critiques the British proposal for 'external convertibility,' which allows non-residents to convert currency while maintaining exchange controls for residents. He labels this 'convertibility without tears,' arguing it allows governments to avoid necessary internal reforms and monetary discipline. He suggests this model is a dead end that protects dirigiste interests and threatens the progress of the EPU (EZU).
Read full textThe author contrasts the British approach with the Swiss model, which grants full convertibility to residents while restricting it for non-residents from non-convertible countries. This 'Swiss way' is presented as a superior, staged method that allows a country to maintain market freedom internally while protecting itself from exploitation by 'soft currency' nations, all while remaining compatible with the EPU framework.
Read full textRöpke analyzes the structural flaws of the EPU (EZU), where disciplined nations like Germany effectively subsidize the inflationary policies of others. He then addresses the fear of 'capital flight,' arguing it is often overestimated. He contends that a sound internal credit policy and the restoration of a currency's 'goodwill' through freedom are the best defenses against capital flight, rather than the 'mousetrap' of exchange controls.
Read full textThe final section of this chunk discusses the necessity of international liquidity and currency reserves. Röpke argues that a free capital market reduces the need for massive reserves. He suggests that US aid should support integral convertibility rather than limited plans. Finally, he proposes that a significant increase in the price of gold (from $35 to $50-60) would be the most effective way for the US to restore global liquidity and end the post-WWI errors of gold valuation.
Read full textThis section outlines the fundamental principles of an action program for returning to currency convertibility. The author argues that 'convertibility begins at home,' emphasizing that national economic stability and non-inflationary market policies are prerequisites for international success. While collective action is preferred over individual efforts to rebuild a functional international monetary system, the author criticizes the European Payments Union (EPU) for its structural flaws and its tendency to shield undisciplined economies. The text advocates for a 'club of convertible currencies' led by economically stable nations to exert pressure on others to adopt monetary discipline.
Read full textThe author examines why the European Payments Union (EPU) has failed to lead countries toward full convertibility, characterizing it as a 'emergency apparatus' that has become a permanent crutch for debtor nations. He proposes several tiers of solutions, ranging from an ideal global 'Club of Convertible Currencies' involving the US and GATT-like trade ethics, to a more realistic 'core' group of stable European nations (Switzerland, Belgium, Netherlands, West Germany, Austria) that could break the ice by establishing integral convertibility among themselves. The section also addresses the complex relationship between this potential core group, the remaining EPU members, and the British sterling block.
Read full textThis section discusses the immediate steps individual countries like Germany should take if collective European action fails, including the liberalization of the dollar zone and the removal of travel currency restrictions. The author shifts to a strong moral and philosophical critique of exchange controls (Devisenzwangswirtschaft), labeling them as 'collectivist foreign bodies' in a free market order. He argues that maintaining such controls is a sign of 'nationalized insolvency' and a 'police state' mentality, asserting that the return to convertibility is not merely a technical issue but a fundamental question of social and economic philosophy.
Read full textAuthored by Guido Carli, this section details the evolution of Italian foreign exchange legislation between 1946 and 1950. It describes the transition from a centralized, bureaucratic control system to a more decentralized model where banks manage foreign exchange transactions. Key objectives included aligning the Lira's exchange rate with its purchasing power through free negotiations and automating the allocation of foreign currency for imports. The text lists specific legislative decrees that facilitated this shift toward a more market-oriented exchange system.
Read full textGuido Carli analyzes the practical challenges Italy faces regarding full convertibility, specifically focusing on the structural deficit in the balance of payments. While Italy has moved toward liberalization within the EPU framework, Carli expresses caution about the liquidation of the EPU. He provides statistical tables for 1950-1954 showing the trade deficit, the role of 'invisible' earnings (tourism and off-shore contracts), and the depletion of reserves. He concludes that for convertibility to work without causing instability, international institutions must be transformed to provide sufficient credit in convertible currencies to manage fluctuating exchange rates.
Read full textThis segment discusses the impact of reorganizing the European Payments Union (EPU) on Italy's economic position. It argues that a gradual approach to convertibility through the EPU would facilitate Italy's continued participation in European economic cooperation, whereas a sudden liquidation of the Union might force Italy into bilateral trade agreements with non-convertible currency states, reversing the progress of economic integration.
Read full textF. Collin provides a comprehensive analysis of the Belgian franc's path toward convertibility. He traces the history of exchange controls from 1940 through the post-war recovery, detailing the 'liberal dirigisme' practiced by the Belgian-Luxembourg Exchange Institute. The text examines Belgium's high export dependency, its relationship with the EPU and the dollar zone, and the technical requirements for a full return to convertibility, including price stability, labor cost comparisons with neighbors (especially the Netherlands and Germany), and the necessity of liberalizing capital movements alongside current payments.
Read full textHenry Germain-Martin analyzes the challenges and prospects for the convertibility of the French franc. He defines monetary internationalism and reviews the history of the franc from the 1914 gold standard to the post-WWII regime of exchange controls. The essay argues that convertibility requires internal fiscal discipline (balancing the budget), structural economic reforms to increase productivity, and an alignment of French prices with international levels. It also discusses France's debtor position within the EPU and the psychological importance of the private gold market in restoring confidence in the currency.
Read full textH. Homberger examines Switzerland's unique position as a hard-currency nation within a Europe dominated by exchange controls. He details the defensive use of clearing agreements to protect Swiss exports and the subsequent transition to the European Payments Union (EPU). Homberger argues against 'totalitarian internationalism' in trade liberalization, defending Switzerland's right to protect vital sectors like agriculture (the 'three-phase system'). He concludes that while Switzerland supports European solidarity and the return to convertibility, it must maintain its sovereignty over internal economic order and be wary of international automatisms that ignore national specificities.
Read full textA brief introductory segment for a discussion on the convertibility of the British pound sterling, focusing on the degree to which authorities can increase convertibility without a comprehensive agreement with the United States.
Read full textThe author defines the concept of convertibility in the context of the British Pound, distinguishing between a total revolution of controls and partial liberalization. He outlines six critical dimensions for analyzing convertibility: the target currency (primarily the US Dollar), the categories of beneficiaries (UK residents, Sterling Area members, or non-resident holders), the origin of funds (old vs. new balances), the purpose of payment (current vs. capital account), the relationship between financial and commercial liberalization, and the choice between fixed or flexible exchange rates.
Read full textThis section examines the technical and systemic challenges that non-resident convertibility of the Pound would pose to the European Payments Union (EPU). The author argues that making the Pound convertible would likely turn Britain into a permanent creditor within the EPU, potentially forcing other European currencies to become as 'hard' as the dollar or rendering the EPU mechanism obsolete for Sterling transactions.
Read full textMeade discusses the trade-offs Britain faces when allocating its limited balance of payments strength. He argues that non-resident convertibility must compete with other priorities, such as relaxing import restrictions for UK residents to maintain industrial productivity and supporting economic development within the Commonwealth and Sterling Area. He warns against prioritizing foreign holders of Sterling at the expense of domestic economic health or political relations with the US.
Read full textThe author advocates for extreme caution regarding convertibility due to the inadequacy of London's gold and dollar reserves compared to pre-war levels. He analyzes the structural reasons for volatility in the British balance of payments, including speculative capital movements ('leads and lags'), inventory fluctuations of raw materials, and the sensitivity of the Sterling Area to US economic cycles. He notes that without a clear commitment to trade liberalization from the United States, unilateral British moves toward convertibility are risky.
Read full textThe final section of this chunk addresses the Pound's role as an international medium of exchange and the resulting difficulties in maintaining exchange controls. Using a hypothetical example involving 'Entrepotica' and 'Sterlaria', the author explains the phenomenon of 'cheap sterling' and 'commodity shunting' (shunting trade), where goods are diverted to dollar markets to bypass currency restrictions. He suggests that while convertibility would eliminate these distortions, it should be paired with commercial controls to prevent a drain on reserves while maintaining inter-European trade liberalization.
Read full textHunold concludes his analysis of Sterling convertibility, weighing the risks of a unilateral move against the benefits of international agreement. He outlines four defensive measures Britain would need in the event of an American economic downturn: using reserves, allowing a lower pound value to attract speculators, intensifying domestic controls, and coordinating with non-dollar countries to discriminate against dollar products.
Read full textF. W. Meyer analyzes West Germany's transition toward currency convertibility following the 1951 balance of payments crisis. He details the progressive liberalization of imports within the OEEC and EPU frameworks, the accumulation of gold and foreign exchange reserves by the Bank deutscher Länder, and the dismantling of central planning mechanisms in the foreign exchange sector.
Read full textThe text describes specific technical relaxations of German foreign exchange controls, including the extension of currency holding periods, simplified import procedures, and the liberalization of travel currency. It also covers the transition from 'Sperrmark' (blocked marks) to transferable accounts and the impact of the London Debt Agreement on capital transfers.
Read full textMeyer argues that true convertibility requires a commitment to a market-based system of balance of payments adjustment rather than administrative force. He warns against the 'convertibility swing' (Konvertibilitätsschaukel) and emphasizes that monetary policy must be primarily oriented toward balance of payments requirements, rejecting the idea that flexible exchange rates allow for total national credit autonomy.
Read full textS. Posthuma details the economic recovery of the Netherlands after 1945. He describes the initial chaos, the monetary reform led by Lieftinck to absorb excess liquidity, the role of the Marshall Plan in bridging the dollar gap, and the gradual liberalization of trade through Benelux and the EPU. The section includes detailed statistical tables on money supply, gold reserves, and national income.
Read full textA comprehensive set of statistical tables (1-10) documenting the Dutch economy from 1945 to 1953. Data points include the ratio of money supply to national income, the development of blocked funds, gold and foreign exchange reserves of the Netherlands Bank, investment and savings rates, and unemployment figures.
Read full textPosthuma discusses the theoretical and practical definitions of convertibility. He distinguishes between 'internal' (resident) and 'external' (non-resident) convertibility and explores the risks of flexible exchange rates. He emphasizes that convertibility is not just a monetary goal but a means to achieve an optimal international division of labor, requiring coordination between the US, the Sterling area, and Continental Europe.
Read full textFriedrich A. Lutz provides a concluding synthesis of the volume's arguments. He identifies the two main points of contention: the priority between resident vs. non-resident convertibility, and the choice between fixed vs. flexible exchange rates. Lutz argues that flexible exchange rates are a necessary mechanism for achieving balance of payments equilibrium without resorting to deflation or trade restrictions.
Read full textA comprehensive name and subject index for the entire volume. The name register includes prominent figures like Adenauer, Erhard, Keynes, and Röpke. The subject register covers topics from 'Abwertung' (devaluation) to 'Zwangswirtschaft' (command economy).
Read full textBiographical sketches of the contributors (Haberler, Jacobsson, Carli, Collin, Germain-Martin, Homberger, Meade, Meyer, Posthuma, Röpke, Lutz) and advertisements for other volumes in the 'Volkswirtschaftliche Studien' series published by Eugen Rentsch Verlag.
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