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The article focuses on the problem of currency stabilization in post-World War II scenario. It is noted that the period after the war led to the emergence of major financial crisis worldwide. Therefore, the need to establish a proper financial institution was felt. It is suggested that the countries whose economies were badly affected should have adopted a formalized plan for their economic development to overcome the international financial problems. It is argued that the gold standard should be modified. It is suggested that the amount of official exchange balances should be increased to correct the unequal distribution of gold and to give more margin for corrective action to countries which are internally disturbing deficits in their international balance.

Until 1924 Germany was on a paper standard. Reparation payments under London settlement did indeed cause the mark to depredate, to a value finally of one billionth of a dollar, but exports did not exceed imports. In 1924 came the Dawes Plan. It adopted for the first time as a rule of procedure the principle of capacity to pay. It passed no judgment on capacity, and was less concerned with immediate than with ultimate capacity. It sought chiefly to establish the conditions which would develop and test capacity. This was indeed a great advance, it put the problem in a new and hopeful setting. The Dawes Plan set up the necessary condition to test capacity to pay. The gold standard was restored, and protected by transfer clauses conditioning reparation payments upon its maintenance. The budget was to be balanced, and for the first time reparation payments were budgeted. The plan sought to adjust the tax burden by gradual stages to German capacity, and it relied on a preliminary foreign loan to ease the transfer process.