The international monetary system is at the core of the global economy. All other aspects of economic relations between nations derive from prevailing institutional arrangements concerning world money and its circulation. Keynes, during a House of Lords debate in May 1944 on Bretton Woods, put this point succinctly:
To begin with, there is a logical reason for dealing with the monetary proposals first. It is extraordinarily difficult to frame any proposals about tariffs if countries are free to alter the value of their currencies without agreement and at short notice. . . . In the same way plans for diminishing the fluctuation of international prices have no domestic meaning to the countries concerned until we have some firm ground in the value of money. Therefore, whilst the other schemes are not essential as prior proposals to the monetary scheme, it may well be argued, I think, that a monetary scheme gives a firm foundation on which the others can be built. It is very difficult while you have monetary chaos to have order of any kind in other directions. ( Keynes, 1980b, p.5)
Keynes' argument, made on the eve of a new international order for the postwar period, has lost none of its relevance five decades later. The emerging global accumulation regime can only work well with a sound international monetary system.
It is time to heed this lesson. There are many indications that all is not well in this regard. The global distribution of capital flows is clearly out of whack when the richest nation of the world absorbs most of the world's savings and the poorest nations are exporters of capital. Existing institutional arrangements consistently fail to correct balance-of-payments disequilibria between countries and place most of the adjustment burden on the weaker economies. Deregulation of interest and exchange rates has caused those prices of money to fluctuate