SUMMARY
World reserves have almost tripled since 1968, with world monetary growth accelerating since 1971 and world inflation jumping to double digits in 1974. In light of these developments, the article looks at whether the stock of world reserves has grown so rapidly that it may generate further world inflation, or whether it is deficient and potentially deflationary. The author first reviews the expansion of global reserves in the 1968-73 period of fixed exchange rates and the recent acceleration of inflation. A comparison of the transitional and permanent effects of floating rates on the demand for international reserves, excess reserves, monetary growth and world inflation is then presented and the impact of gold prices on the monetary bases, growth and inflation is taken up. Finally, OPEC’s accumulation of foreign assets and its impact on the monetary bases of individual countries is considered, as well as other influences on world liquidity. JEL: E31, E42, F31