[Editor's Note: In recent years, there has been a great deal of discussion concerning the fixed par-value system of exchange rates established in the Articles of Agreement of the International Monetary Fund. A recent report (September, 1970) from the Executive Directors of the Fund to its Board of Governors—"The Role of Exchange Rates in the Adjustment of International Payments"—grouped the main problems which have been encountered in the operation of the par-value system: (1) adjustments in par values have often been unduly delayed; (2) the general cost of delayed exchange adjustment is high in relation to the general benefit from the avoidance of premature adjustment; and (3) there is a likelihood that disequilibria between major modern economies may arise fairly frequently, or even continuously, and hence calls for prompt and smooth adjustments of exchange rates more frequently than have occurred in the past. The Executive Directors, in that Report, reaffirmed the basic features of the Bretton Woods system and rejected three major alternative exchange rate systems which have been proposed in recent years: (a) a regime of fluctuating exchange rates; (b) a regime based on par values agreed with the Fund but allowing substantially wider margins than are now permitted by the Articles; and (c) a regime under which parities would be adjusted at fixed intervals on the basis of some predetermined formula which would be applied automatically. The Executive Directors also considered various proposals for adapting the par-value system, which they believe continues to be sound. Those that appeared to them to merit continuing study were a slight widening in the margins around parity, and permitting temporary deviations from the par-value obligations of members, i.e., moving to fluctuating rates, with appropriate safeguards.

In these days when the exchange rate provisions of the Articles of Agreement of the International Monetary Fund are being scrutinized, although in a spirit of continued approbation of the basic principles of what is called the par-value system or the Bretton Woods system, it may be useful to examine one of the most remarkable features of the agreement which was reached in July, 1944. The reference is to Article IV, Section 6, of the Articles of Agreement, which deals with what are called, in the title of the provision, "unauthorized changes" of par values. The provision is interesting not only because it establishes an important principle of the par-value system but also because it does this by means of a novel and ingenious legal technique.