SUMMARY The inherent volatility of international capital flows, which has profound consequences for exchange rates and macroeconomic policy, is widely held to require public action in order to create an orderly market ‐ which would be of particular benefit to developing economies. This article suggests that the current proposals for reform, which rely on intergovernmental institutions and provision of liquidity to debtors, misunderstand the nature of the problem: what is needed is the prudential regulation of private creditors on a global scale. The somewhat speculative implication is that the United Nations should work towards the establishment of the international contract system which the existence of a truly global capital market implies.