HOW MONEY TALKS

A Partial Glossary of Monetary Language:

International Liquidity: the degree to which money and gold are available for international transactions. Liquidity is maintained when there is sufficient money, and that's good; it dries up as the supply of money decreases, and that's bad.

Devaluation: reducing the value of a nation's currency by making each of its units of money worth less in gold. This enables foreigners to buy that country's goods for less while forcing nationals to pay more for foreign goods--one way of reducing a payments deficit.

Revaluation: increasing the value of a currency by making its money unit worth more in gold, as both West Germany and The Netherlands have done in recent years.

Convertibility: the quality of a currency that enables it to be freely exchanged for gold or other currencies in all types of international transactions.

Par: the amount of gold for which a nation is willing to exchange its unit of currency. This figure is registered with the International Monetary Fund, and may not be changed by more than 10% without the approval of the IMF.

Gold Cover: the percentage of a nation's total money supply that its law requires it to back with gold; in the U.S., it is 25%.

Reserves: a country's holdings of gold, dollars, sterling and other convertible currencies kept for payment in international transactions.

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