CHANGING FORTUNES

Insightful appraisals of the global monetary order from a pair of technocrats who played key roles in shaping its past, present, and future. This study grew out of a series of seminars at Princeton conducted by Volcker (former chairman of the Federal Reserve Board) and Gyohten (until his recent retirement, a senior official in Japan's Ministry of Finance) during the spring of 1991. Here, they take turns surveying the postwar history of the world's monetary system, from the Bretton Woods era of stable currencies through the latter-day problems caused by floating exchange rates. Along their way, the authors assess the impact of so-called oil shocks, the Smithsonian accord (which put paid to the gold standard), the Latin American debt crisis, and other landmark events. Covered as well is the emergence of Japan and Germany and its EC partners as economic powers to be reckoned with, and the relative decline of a once- dominant US. Volcker and Gyohten both tend to address their common subject in ways that conform to, if not confirm, national stereotypes. Throughout, the American is blunt, albeit fundamentally optimistic about prospects for the US and the wider world. By contrast, Gyohten, while candid about the altered state of the ties that still bind Japan and the US, is circumspect, even conciliatory, stressing the historic success of a grand alliance while soft-pedaling the uncertainties that cloud its future. The odd couple agree on any number of points—that strong currencies afford a competitive edge on the home front as well as in international commerce; that regional trading blocs could lead to undesirable protectionism; that monetary and fiscal policies must be coordinated on a supranational basis, etc. Illuminating and accessible perspectives on a topic of vital interest to us all.