Thursday, August 18, 2016

FRB - AG - Remarks by Chairman Alan Greenspan - Currency reserves and debt

Remarks by Chairman Alan GreenspanCurrency reserves and debt

Before the World Bank Conference 

on Recent Trends in Reserves Management, Washington, D.C.

April 29, 1999

One way to address the issue of the management of foreign exchange reserves is to
start with an economic system in which no reserves are required. There are two.
The first is the obvious case of a single world currency.
The second is a more useful starting point: a fully functioning, fully adhered to,
floating rate world.

All requirements for foreign exchange in this idealized, I should say, hypothetical,
system could be met in real time in the marketplace at whatever exchange rate prevails.
No foreign exchange reserves would be needed.

If markets are functioning effectively, exchange rates are merely another price
to which decisionmakers--both public and private--need respond.
Risk-adjusted competitive rates of return on capital in all currencies would converge,
and an optimized distribution of goods and services enhancing all nations' standard
of living would evolve.

Only liquid reserves denominated in domestic currency would be required by public
and private market participants. And in the case of a central bank of a fiat currency regime,
such reserves can be created without limit.

But, clearly, the real world is not perceived to work that way..

Read in full here ->


Wednesday, August 17, 2016

OECD - Crisis Management in the International Monetary and Financial System

Crisis Management in the International Monetary and Financial System

OECD Working Party 3 (1961-1979)

by Kazuhiko YAGO

"The postwar international financial system went along with several “forums” of decision making, official as well as unofficial. Starting with the Bretton Woods Institutions, namely the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD, the World Bank), bi-lateral negotiations between the United States and the European countries took part in the “forum” for reconstruction; the Bank for International Settlements (BIS) and the European Payments Union (EPU) began to play important roles in the 1950s; several “Groups”, from the G10, C20 to the G5, G7, faced the reform of the Bretton Woods System. Of the above “forums”, one of the most enigmatic bodies was the Working Party 3 (WP3) of the Organisation for Economic Cooperation and Development (OECD). Set up in 1961 as a mere technical working group for the Economic Policy Committee (EPC) of the OECD, the WP3 soon became an important meeting place to discuss the overall strategies of the world economy. Chaired by Emile van Lennep (later Secretary General of the OECD), the WP3 brought together not only the brightest agents of the OECD member countries, but also representatives of the BIS and the IMF..."