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American in the Shadows : Harry Dexter and The Design of the IMF - Boughton

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McGill University
Political Science
POLI 354
Mark Brawley

POLI 354 APPROACHES TO INTERNATIONAL POLITICAL ECONOMY milie HorrocksDenis NOTES ON READINGS WEEK 13AMERICAN IN THE SHADOWS HARRY DEXTER WHITE AND THE DESIGN OF THE IMF BOUGHTON 2006 Abstracty two econmists designed the main features of the IMF during WWII John Maynard Keynes and Harry Dexter White Boughton 2006 1y Several of those features are attributable primarily to White including the adoption of fixed but adjustable exchange rates the funding of operations with national currencies deposited by member states extending credits through currency swaps rather than conventional loans making these credits subject to policy conditions and encouraging members to retain capital controls as an option for use in different circumstances Boughton 2006 1 Introduction Boughton 2006 3y Charter for International Monetary Fund IMF designed in stage starting in 1941 and culminating in intl conference held at Bretton Woods New Hampshire in July 1944y Discussins and drafting led by John Maynard Keynes head of British delegation at BW and by Harry Dexter White main member of US deligation Boughton 2006 1 y Establishing WHItes contribution to the design of the IMF important for three reasonso without ful understainding of Whites role impossible to properly assess that of Keyneso IMF has become the leading intl financial instn in world and major object of scrutiny and controversy o White more important figure in history of econ through than is generally recognizedBoughton 2006 34I Harry Dexter Whitey Assistant Secretary of the Treasury Hreny Morgenthau Jry after IMF agreement ratified at end of 1945 President Harry S Truman named White first US Executive Director of the Fund III THe Design of the IMF Boughton 2006 67y Design of IMF included several features that either were new to intl financial system or that resored practices that had been lost or diminished since start of WWI in 1914o Intl trade was to be based on gold exchange std w exchange rates to be fixed in rln to gold and w stocks of gold to be held by gvts or central banks as monetary reserveso US dollar would be de facto core currency in system From outset official holdings of dollars second form of monetary reserves dollar primary vehicle for settling intl payments and most states would determine the par value of their currencies in rln to the dollar rather than in rln to equivalent gold content of dollaro exchange rates fixed but adjustable w large changes in rates being acceptable only to correct a fundamental disequilibrium in intl payments IMF arbiter of whether such correction appropriate though limited power to sanction member states for unapproved changes o IMF central repository for portion of each member states gold and foreign exchange mainly US dollar reserves w amount to be depostited based on quota formula linked to countrys output and intl tradeo to help member states cope w disequilibriafundamental IMF make pool of resources temporarily available to any member that needed funds to finance deficit in current payments limited in relation to members quota subject to interest charges ad other fees Although transaction legally distinct from loans no loan contract Instead borrower would purchase foreign exchange from IMF in exchange for its own currency and then later repurchase its currency w foreign exchangey Purposeso specific purpose of each feature promote growth of intl trade and stability of intl paymentso general purpse restore multilateral trade and payments and open competiton after long era of disruptions characterized by autarky bilateral arrangements and mercantilismo these goals widely shared during WWII among economists and officials in all leading Allied countriesy Keynes o fighting for Britaino create instn that would provide max financing autonomatically in support of British econ recovery from devastation of the war
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