Burns Prods for Reform

Federal Reserve Chairman Arthur Burns has been an intellectual prodder to the Nixon Administration, speaking up in favor of such unpleasant but necessary moves as wage-price controls and dollar devaluation. Last week he set out to overcome the Administration's seeming hesitancy to start negotiations quickly for rebuilding the world financial system, which cracked apart last summer and was only patched back together by last December's currency realignments. At a conference of U.S. and foreign bankers in Montreal, he outlined a ten-point program that was the first statement by a high U.S. official of goals for a new money system. It does not commit American negotiators--Treasury Secretary John Connally would prefer that the U.S. build up a stronger balance of payments position before sitting down to parlay--but Burns called his speech "a pretty fair summary of the U.S. position." His main points:

> As part of a reform package, the dollar should again be made convertible into other reserve assets, presumably including gold.

> While gold cannot realistically be dropped completely as a form of money because too many people cherish it, its role should diminish, and it should be gradually replaced by the IMF Special Drawing Rights ("paper gold").

> Countries that pile up big international-payments surpluses should be compelled to reduce them; in addition, debtor countries like the U.S. should be forced to wipe out big deficits.

> The world's financial powers should not talk only about money reform but should also hold "parallel conversations" about lowering barriers to world trade.

Such aims are easier to state than achieve. Burns warned that unless a start is soon made, the non-Communist world may break up into restrictive and competing trade blocs. His initiative moved Treasury Under Secretary Paul Volcker to set a tentative timetable for monetary reform. Volcker specified the International Monetary Fund meeting in the fall of 1973 as "a useful target date for getting a general agreement."

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