My purpose in this paper is to outline a new approach to the theory of the balance of payments and of balance-of-payments adjustment (including devaluation and revaluation) that has been emerging in recent years from several sources. Concretely, this new approach is found in the change in policy orientation adopted by the British government under pressure from the International Monetary Fund after the devaluation of 1967 failed to produce the expected improvement in the British balance of payments. The theoretical basis for the new orientation can be traced back to the work of the Dutch economist J. J. Koopmans. The new approach is also evident in the theoretical work of my colleagues at the University of Chicago, and R. A. Mundell and his students, although it is only fair to note that economists elsewhere have been working along similar lines. The essence of this new approach is to put at the forefront of analysis the monetary rather than the relative price aspects of international adjustment.