Evening star., 1961-09-23
Scheme 10 Bar
Spectators
Outlined

VIENNA, Sept. Z3 tAP).-
Finance ministers and top
bankers of the non-CommuniSt
world feel they have found a
new way to frighten off money
speculators-a plan for a $6
billion reserve fund of which
not a cent may ever be used.
The plan was outlined here
by the governors of the 73-
nation International Monetary
Fund and World Bank. Their
five day meeting ended yester-
day.
For the world of high fl
nance. the conference repre-
Sented a new phase in the
struggle for monetary stability
begun at the Breton Woods
conference in the last months
of World War II. Experts hope
the meeting also produced a
new bulwark against commu-
nism, which thrives on eco
nomic chaos Of any sort.
Although details still must be
negotiated, agreement emerged
for II countries to provide the
INF standby credits for emer-
gency use. They are the
United States, Britain. Can
ada. Japan. Austria, Sweden,
France. West Germany, Italy,
Belgium and The Netherlands.
INF officials expect the
standby credits to approach Sc
billion, giving the fund a Sec
ond line of defense to fall back
upon if its regular resources
of SIS billion prove inadequate
for the job of bolStering weak
currencieS.
Fear Run on Dollar
The experts fear this could
happen if a sudden and specu-
lative run starts on a major
world currency-a run on the
dollar, for example. -.
Currency speculators try to
buy when the price is low, sell
when it Is high. Or they may
sell a currency when it is high
in the expectation that its
value will fall and they will be
able to buy it back more
cheaply.
Before World War II the
activities of the spectators
caused exchange rates to fluc-
tuate widely, making interna-
tional trade risky. contributing
to economic unrest and even
to depression.
The INF was set up at Bret
ton Woods to promote fixed
exchange rates. When a mem
Der nation has trouble main
tanning the value of it's cur
rency, it can draw stronger
currencies from the fund to
shore up its own.
Until April, 1858, 80 per
cent of the drawings were in
dollars. Then things changed.
Other currencieS bacame strong
er. Last winter pressure began
on the dollar. Gold was with
drawn from the United States.
RumorS began on the money
markets that the United States
might ask the fund for foreign
currencies to strengthen the
dollar.
Need to Strengthen INF
Some economists began to
worry that the monetary sys-
tenn still was not safe from
spectators. They felt they had
to strengthen the INF with
additional resources to help
the dollar or any other major
currency. Thus they hit on the
standby credits scheme.
Not everyone was convinced.
The French and the Dutch said
it would only help the dollar
and British sterling. INF Of
ficials argued that the scheme
would also help the continental
European countries if their cur
rencies ever went bad again.
The Americans and British
pointed out they, too, were
putting up credits.
The Berlin crisis helped the
INF win its argument. The
French and the Dutch realized
that a war scare in Europe
could hurt European cur
rencies.
United States Treasury Sec
retary Dillon says the United
States share will be 81 billion.
Shares of other countries are
still a matter of negotiation,
but Britain and West Germany
may each supply between $7OO
million and 81 billion.