INTERNATIONAL LIQUIDITY AND AMERICAN POLICY.

SUMMARY Two important themes in recent discussions of the evolution of international monetary institutions are the problems of cooperation among central banks and the role of exchange guarantees. These themes are illustrated by a discussion of United States Federal Reserve and Treasury foreign exchange operations, proposals for a multiple key-currency system, and suggestions for making currency swap agreements permanent and access to overdrafts automatic. It is argued that, while cooperation is required in any system, the more it is arranged in advance and formalized the less will be the unjustified deflationary bias in policy. Further, a multiple key-currency system is appreciably more unstable than one based on automatic extensions of liquidity, even if both are supported by exchange guarantees. These considerations suggest that adopting a multiple key-currency system, as advocated by F. A. L utz among others, would be inferior to automatic prearranged currency swaps and overdrafts as suggested by P. B. K enen and others. [ABSTRACT FROM AUTHOR]