What is the Roosa Plan for International Monetary System?

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Mr. Robert U. Roosa, Under Secretary to the U.S. Treasury, also put forward a plan for increasing international liquidity at the IMF meeting in 1962.

According to the Roosa Plan, the need for future increase in international liquidity is to be met partly through new supplies of gold and partly through the creation of new reserve centres. Thus, Roosa proposed another international currency to be regarded as key currency like dollar and sterling to form the international reserves. His proposal sought to make the new currency unit, in course of time, as generally acceptable as gold.

This according to him would become possible by forming a pool of international currencies with the Fund, acceptable among international banks, while ensuring that the pool maintained its gold value. Each country contributed its own currency and acquired pool currency. Each such country had the obligation of convertibility and of maintaining its currency exchange value. The Roosa plan thus, sought to superimpose a world credit system on the top of the world gold system.

It can be said that the acceptance of the Roosa Plan will mean a revolutionary step in the creation of international credit in as much as it means the acceptance that a balance at the IMF is just as acceptable as gold itself. But its success is conditioned by the confidence and goodwill of the participating countries.

Concluding Remarks :

The problem of international liquidity is less pressing now than it was a few years ago but it is likely to become serious in the future. It will have serious repercussions on the trade and economic prosperity of the world.

Though, various steps have been undertaken by the IMF to ease the problem, yet no automatic solution to the likely future gravity of the problem has been provided. Hence, various proposals and schemes as discussed above have been put forward to bring about a permanent and built-in remedy for the problem of shortage of international liquidity.

All these proposals, except gold revaluation, aim at the establishment of a fractional reserve system which combines holdings of both gold and foreign exchange as reserves. But amongst all, the Triffin plan has much to commend itself if a real solution is to be found. Triffin rightly views that the activities of the Fund can be expanded only when it is converted into an international bank. Though, in accepting Triffin's proposal to make the IMF world's central bank, sovereignty of national central banks will have to be surrendered to some extent. This sacrifice is inevitable for the good cause of benefits to all to maintain prosperous international economic relations.


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