SUMMARYThis paper attempts to develop rigorous, if somewhat less than fully operational, definitions of the twin concepts of individual nation and world international liquidity. These definitions make the international liquidity of an individual country (Zi, in the case of country i) a probability‐weighted sum of its foreign assets, liabilities, lines of credit and prior commitments, and world liquidity (L) the sum of the various Li.It is argued that the state of a nation's balance of payments at any time may fruitfully be expressed in terms of the rate of change of its international liquidity so defined. Inasmuch as such a formulation removes the restriction that balance of payments surpluses and deficits of all nations net to zero, it supplies the ancient words ‘favorable’ and ‘unfavorable’ with new significance.Finally, the paper considers several classes of current schemes to increase world liquidity. The definitions prove helpful in indicating just what conditions must obtain if reformers’ hopes are not to be