It used to be that the term ‘international liquidity’ meant the relative amount of resources available to a nation’s monetary authorities that could be used to settle a balance of payments deficit.

In the days of the gold standard, this would mean access to gold that could be used to redeem a nation’s currency held by foreigners.

After Breton Woods and the advent of the dollar-gold exchange standard, liquidity came to mean access to dollars, either held as reserves or as credit lines, or the SDR system maintained by the International Monetary Fund.

After 1971, with the abandonment of the dollar-gold exchange standard, as the world entered an era of ‘managed’ exchange rates, some ‘floating’, some ‘pegged’, ‘international liquidity’ came to mean the resources available to national monetary authorities to maintain the value of their currencies as required by their exchange management programs.

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