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Special drawing rights (S.D.R.s). The instruments for financing international trade in the post-war period were predominantly the reserve currencies, such as dollars and sterling, and gold. Dependence on the latter, as j. m. keynes pointed out, is an anachronism which had been successfully terminated as far as domestic economies were concerned. The problem of depending on the former was that the supply of these currencies was regulated by their countries’ balance-of-payments deficits or surpluses. The deficit on the U.S. balance of payments had been an important source of the flow of liquidity into central bank reserves. The difficulty was that persistent deficits led to doubts about the maintenance of the currency’s exchange rate and made central banks less willing to hold dollars. In the mid 1960s, indeed, it was declared policy of France to sell dollars for gold. This problem came to a head in August 1971, when the U.S. government imposed various measures to correct its balance-of-payments deficit. In December 1971 the dollar was devalued by about 10 per cent. The Group of Ten’ international monetary fund) countries agreed that discussions should be held to review the whole problem of international liquidity. J. M. Keynes had put forward the idea of an international currency, to be called bancor, regulated by a central institution keynes plan). This idea was turned down then for fear that the creation of liquidity would generate inflation. In July 1969, the Group of Ten’ agreed to establish S.D.R.s, which are similar in principle to Keynes’s original idea, and their agreement was ratified by the I.M.F. The S.D.R. was linked to gold and equivalent to $1 U.S. at the gold rate of exchange of $35 per oz. Until December 1971, an S.D.R. was equivalent to $1, but with the effective devaluation of the dollar following the smithsonian agreement, the rate became 1 S.D.R. = $1-08571. With the subsequent breakdown of the fixed parity system, the I.M.F. valued the S.D.R. in terms of a basket’ of sixteen currencies, so that, as from July 1974, the rate in relation to the dollar floated’. At the beginning of 1976 the rate was 1 S.D.R. = $1-17183. At the beginning of 1970, a total of $3,414 million worth of S.D.R.s were distributed. The allocation agreed upon for the period 1979 to 1981 amounted to S.D.R. 12 billion. These sums are distributed to each member country in proportion to its I.M.F. quota. The total holding of S.D.R.s in 1980 was S.D.R. 16-25 billion, of which the United States held S.D.R. 2-946 billion. In 1981 the S.D.R. was simplified to a weighted average of U.S. dollars (42 per cent), German Deutschmarks (19 per

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