Central institution (Keynes Plan). This idea was turned down then for fear that the creation of

Squidity would generate inflation. In 1969 the “Group of Ten” agreed to establish SDRs, which

are similar in principle to Keynes’s original idea, and their agreement was ratified by the IMF. The

SDR was linked to gold and equivalent to $1 US at the gold rate of exchange of $35 per oz. Until

December 1971 an SDR was equivalent to $1; but, with the effective devaluation of the dollar

f ollowing the Smithsonian Agreement, the rate became 1 SDR = $1,08571. With the subsequent

breakdown of the fixed-parity system, the IMF valued the SDR in terms of a “basket” of sixteen

currencies, so that, as from July 1974, the rate in relation to the dollar “floated.” By 1996 SDR 30

Billion had been created. These sums were distributed to each member country in proportion to its

IMF quota. In 1981 the SDR was simplified to a weighted average of US dollars (42 per cent),

German deutschmarks (19 per cent), French francs, Japanese yen and UK sterling (13 per cent

Each). The weights reflected the importance of each country in world trade. Accordingly, these

Eights are revised periodically. In 1997 they were US dollars (39 per cent), German deutschmarks

(21 per cent), Japanese yen (18 per cent), French francs and UK sterling (11 per cent each).

In 2001-2005 they were U.S. dollars (45 per cent), Euro (29 per cent), Japanese Yen (15 per

Cent), UK sterling (11 per cent) each.

Commentary and Notes to Text 7.7.1.5