This brings me to my final concluding remarks and suggestions.
The International Monetary Fund has been and still is concerned
with two major problems, international liquidity and balance-of-payments
disequilibria. With respect to the former, the Special Drawing
Rights (SDR)were introduced in 1968 as a complement to international
monetary reserves of gold. While the demonetization of gold has
been a popular idea in many circles, particularly in the United
States, the SDR as an alternative did not gain the position it
was hoped to. Governments and central bankers are in fact very
skeptical about its future as a world currency. In my opinion,
the main reason for this skepticism stems from the fact the success
of the SDR as a true world currency depends totally on the establishment
of an authoritative world central bank, a situation which will
never happen at least in our life times simply because this will
be at the expense of national sovereignties. In the meanwhile,
Petrodollars cannot augment world monetary liquidity because
such reserves cannot last as they will be absorbed in oil-exporting
counties for economic development, expansion of their own national
security and for other such uses.
I propose, therefore, that Saudi Arabia as the largest exporter
of oil in the world legislate a full convertibility of its Riyal
into gold. This convertibility will have obvious economic advantages
to both Saudi Arabia and to the West of the World. Other oil-exporting
countries, individually, regionally or as a group, may adopt the
same policy. The price of oil may then be stabilized so long as
it is expressed in units of currencies which are fully convertible
to gold. Such currencies can then play a significant role as a
basis for an international monetary reform.
1Charles Issawi & M. Yeganeh, The Economics of Middle Eastern Oil, Frederick A. Praeger Publisher, New York, 1962, p. 66
2A complete text of Resolution XVI, 90 is found in the Middle East Survey, Supplement, July 26, 1968.
3 Aramco was the consortium established for the exploitation of the Saudi Arabian oil by Exxon, Texaco, Socal and Mobil.
4 From 1947-1959, Issawi and Yeganeh, op. Cit., pp.67-68 and from 1960 to 1973, Petroleum Times, December 1973.
5 US Wholesale Price Index (All commodities), calculated from Table C-49, p. 305, Economic Report of the President, United States Government Printing Office, Washington, D. C., February 1974.
6 Average GNP Price Index of Austria, Belgium, Denmark, France, Germany (F.R.), Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey and U.K., calculated from Organization for European Economic Cooperation (O.E.E.C.), Statistics of National Produce and Expenditure, No. 2 for 1947-1955, Paris 1957, Table 19, p.28 and Organization for Economic Cooperation and Development (O.E.C.D.), Main Economic Indicators, Paris 1973.
6 Gottfried Haberler, Two Essays on the Future of the International Monetary Order, American Enterprise Institute, Washington, D.C., 1973, p.15
7John C. Fisher, Energy Crisis in Perspective, Wiley-Interscience Publication, New York, 1974, pp. 160-161.
8 International Reports, December 7, 1993.
9 Houthakker and Kennedy, The Wall Street Journal,
January 22, 1974.