“Europe and the money muddle” revisited

Abstract

The inability of European governments to negotiate the long overdue reform of an anachronistic international monetary system finally brought about its total collapse, and the “new economic policy” launched in 1971 by the Nixon Administration has certainly failed so far to remedy either the world inflation or the world recession and unemployment. The present article looks at how the world economy got to this point and how it can get out. The author first considers the role that non-monetary causes, national monetary permissiveness, international monetary institutions and policies, and the abdication of responsibility to the private market have played. Possible solutions to the principal economic problems (inflation, unemployment, balance of payments disequilibria and income disparity) are then identified in international monetary reform and exchange rate interventions. Finally the author assess the challenges that face the European Community going forward.

JEL: E42, E31, E24