September 2008 saw the United States financial system at the edge of collapse, with the tightly integrated global financial system following close behind. But that was only a symptom of the problems that generated the ensuing crisis. The more fundamental cause lay in some of the practices that had developed in many of the major financial institutions.The emergence of perverse incentives helped create a credit bubble that eventually burst. But even these failures of the financial system, by themselves, would have been unlikely to cause a crisis of the scale that the world confronted. That was fostered by the massive expansion of liquidity that developed in the global financial system – and its inevitable impact on interest rates and the search for yield that those low rates created. That, in turn, was a result of failures within the international monetary system (IMS). This book will help anyone who is seeking to understand how the international monetary system works, the sources of its weaknesses and vulnerabilities, and the proposals for its change. The Palais Royal Report, and the other papers in this book, will help stimulate a global discussion of the reforms to the international monetary system that are so urgently needed. Recognizing the weaknesses in the international monetary system (IMS) that helped produce the recent global economic crisis – and that hold the potential to create further crises, in late 2010, Michel Camdessus, TommasoPadoa-Schioppa, and AlexandreLamfalussy organized a group of eminent personalities – The Palais Royal Initiative – to evaluate the IMS and to propose changes that would be needed to help stabilize the system and reduce the likelihood of future failures. The weaknesses in the international monetary system are manifold and have been evident for some time. It is without an effective currency anchor; it is without effective mechanisms to discipline the policies of the major countries which determine financial conditions within the system; it is without an effective global financial regulatory authority; and it is severely weakened by problems in its structure of governance. The conclusions of this Group – Reform of the International Monetary system: A Cooperative Approach for the Twenty First Century – appear in the first section of this collection. The other papers in this book, put together by Jack Boorman and Andre Icard, serve as proximate background to the deliberations of the group. These papers help define the issues that need attention, and that begin a process to identify the changes to the system that could help reduce its vulnerabilities and increase its contribution to stability and growth in the global economy.