Rising Cry for Reform

An increasing number of economists and financial men believe that basic changes in the international monetary system can no longer be avoided. Last week Roy Jenkins, British Chancellor of the Exchequer, called for "an urgent review" of the world's monetary arrangements. In varying degrees, that view was echoed in France, West Germany, Italy and Switzerland. More and more, the experts talk of the urgent need to convene another Bretton Woods-style conference, perhaps in Washington, as soon as possible after the Nixon Administration is sworn in.

For the moment, most Nixon advisers lean toward quiet consultation in the clubby fraternity of central bankers and treasury officials as a more promising approach. Though the Nixon camp is committed to no specific program for monetary reform, any effort would include debate on the means to:

> Expand international monetary reserves, which have become too thin to support the expanding volume of world trade. Since the recent humbling of the franc, France may be more willing than before to support the quick creation of the "special drawing rights." The SDRs are a form of "paper gold" that would be dispensed by the International Monetary Fund to supplement real gold, dollars and pounds in bankrolling trade and investment.

> Restrict the powers of some speculators, including the huge multinational corporations, most of which are U.S.-controlled. Such firms hold enormous cash reserves in foreign currencies. Whenever a crisis threatens, treasurers rush to shift their reserves from "weak" currencies (currently French francs and British pounds) into "strong" currencies (currently German marks, Swiss francs and others) and thus bring on or aggravate a crisis.

> Revalue certain currencies. Among the undervalued currencies at present are the mark, the Swiss franc and probably the Italian lira and the Dutch guilder. Many financial experts believe that they should all be scaled slightly upward. The overvalued currencies--generally those that cannot buy as many goods and services at home as abroad--are the dollar, the pound and De Gaulle's franc.

> Make exchange rates more flexible. According to the present rules of the International Monetary Fund, exchange rates may vary no more than 1% from par, or else countries have to devalue. To prevent such unsettling measures, more and more economists--including some close consultants to Nixon--argue that currencies should be allowed to fluctuate up or down by 4% or 5%. Then governments would not be forced to take sudden measures to restrict their domestic economies and restrain their imports--moves that hurt all consumers.

Sacrificing Sovereignty. "The No. 1 theme for 1969 must be monetary reform," says West Germany's Economics Minister, Karl Schiller. "As long as every nation pursues a different economic policy, there will be ever recurring speculations and danger of an explosion of the monetary system."

Resolving the differences will require each nation to sacrifice some monetary sovereignty and turn over more authority to the International Monetary Fund. But the harsh fact is that the current, outdated system has already cost much sovereignty by forcing nations to take unwanted and potentially unhealthy steps to raise taxes, restrict trade and deflate economic growth for the sake of sound money.

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