The Freeman 1972 - The Ludwig von Mises Institute

ij~ ~I\~©~ @~ ~ ~m~@~~~~W @~[ID~~HANS F. SENNHOLZEVER SINCE President Nixon suspendedgold payments, on August15, 1971, the question of realisticpar values of the world's currencieshas become a vexing internationalpclitical issue. Governments andCEntral banks are searching fornew rules that permit "more flexible"currency fluctuations. Somethingbeyond dollars and gold isneeded, they believe, to provide asolid base for a new monetary order.Return to the old systemspawned at Bretton Woods, N. H.,in 1944, is out of the question. Itwas a gold and dollar standard,with the U.S. dollar payable ingold ,at $35 an ounce while othercountries pegged their moneys tothe dollar, holding them within arange of 1 per cent up or downDr. Sennholz heads the Department of Economicsat Grove City College and is a notedwriter and lecturer on monetary and economicprinciples and practices.from the parity registered withthe lIB-country InternationalMonetary Fund.Now, since the suspension ofgold payments, the world has beenwaiting for monetary authoritiesto find a new monetary system..The process must necessarily beslow, as a political solution issought to economic problems thatwere generated by various politicalconsiderations. After all, thedepreciation of the U.S. dollar,which finally led to the gold paymentsuspension, was a politicalact by the monetary authorities ofseveral Federal administrations.The decision to "float" the dollarrather than face the humiliationof a formal devaluation was alsoa political act. Similarly, the othergovernments are motivated politicallyin their attempts at monetarymanagement.3