Below is an excerpt from a Wall Street Journal article by Judy Shelton, a senior fellow at the Atlas Economic Research Foundation and co-director of their Sound Money Project. The article makes the point, through an examination of the history and traditional functions of the IMF, that the organization’s ability to promote stable market flows of capital has reversed since the original system (based on a currencies pegged to a gold backed dollar) was abandoned. The article also looks into recent criticism of “fiat” money by former Fed chairman Allan Greenspan and support for gold expressed by Robert Mundell, the intellectual “father of the Euro.”
We hope you find this material of interest.
American Principles in Action
Lagarde's Golden Opportunity
The IMF needs to return to its original mission of achieving a stable monetary foundation for economic growth.
By JUDY SHELTON
It can be hard to remember these days, but the International Monetary fund started out as an undeniable force for good. Even as World War II was raging in July 1944, delegates from dozens of nations convened at the remote mountain resort of Bretton Woods, New Hampshire, to hammer out an international monetary agreement. The goal was to provide hope to a world beset by war through a stable monetary foundation to support free trade and international capital flows.
Yesterday former French Finance Minister Christine Lagarde took the helm of the IMF, and the world now faces a different sort of crisis. The prospect of debt default by Greece threatens the euro currency union. While riots and tear gas in Athens are a far cry from the horrors of war, the scenes of unrest are disturbing nonetheless. The IMF's ostensible purpose remains to counter disillusionment and enhance economic opportunity. By all appearances of its ministrations in Europe, it is failing.
Financial stability can only arise from coherent monetary arrangements. But the IMF has strayed from its founding mission of supporting sound money—far enough that, when it comes to promoting the free flow of goods and optimal use of investment capital around the world, the IMF may be doing more harm than good.