The Bancor was a supranational currency that John Maynard Keynes conceptualised in the years 1940-42 and which the United Kingdom proposed to introduce after the Second World War. This newly created supranational currency would then be used in international trade as a unit of account within a multilateral barter clearing system – the International Clearing Union – which would also have to be founded. The Bancor was to be backed by barter and its value expressed in weight of gold. However, this British proposal of introducing a supranational currency could not prevail against the interests of the United States, which at the Bretton Woods conference established the U.S. dollar as world key currency.
Since the outbreak of the financial crisis in 2008 Keynes's proposal has been revived: In a speech delivered in March 2009 entitled Reform the International Monetary System,Zhou Xiaochuan, the governor of the People's Bank of China called Keynes's bancor approach "farsighted" and proposed the adoption of International Monetary Fund (IMF)Special Drawing Rights (SDRs) as a global reserve currency as a response to thefinancial crisis of 2007–2010. He argued that a national currency was unsuitable as a global reserve currency because of the Triffin dilemma - the difficulty faced by reserve currency issuers in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency.[1][2] A similar analysis can be found in the Report of the United Nation's "Experts on reforms of the international monetary and financial system" [3] as well as in the IMF's study published on April 13, 2010 [1][4]
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The International Clearing Union (ICU) was one of the institutions proposed to be set up at the 1944 United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire by British economist John Maynard Keynes. Its aim was to have been regulation of currency exchange, a role eventually taken by the International Monetary Fund (IMF).
The International Clearing Union (ICU) would be a global bank whose job would be to regulate trade between nations. All international trade would be denominated in its own currency, the proposed bancor. The bancor was to have had a fixed exchange rate with national currencies, and would have been used to measure the balance of trade between nations. Every good exported would add bancors to a country's account, every good imported would subtract them. Each nation would be incentivized to keep their bancor balance close to zero. If a nation had too high a bancor surplus the ICU would take a percentage of that surplus and put it into the Clearing Union'sReserve Fund; this would encourage nations with surpluses to buy other nations' exports. Nations that imported more than they exported would have their currency depreciated against the Bancor; encouraging other nations to buy their products, and making imports more expensive.
George Monbiot, a contemporary critic of the IMF, has argued that the ICU's proposed mechanisms would have given greater weight in decision-making to the less-developed countries, which were not then as heavily involved in international trade as they are now.
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http://en.wikipedia.org/wiki/Triffin_dilemma
The Triffin dilemma (or the Triffin paradox) is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfil world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit.
The use of a national currency as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States. Currency inflows and outflows of equal magnitudes cannot both happen at once.
The Triffin dilemma is usually used to articulate the problems with the US dollar's role as the reserve currency under the Bretton Woods system, or more generally of using any national currency as an international reserve currency.
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http://en.wikipedia.org/wiki/Bretton_Woods_system#Dollar_shortages_and_the_Marshall_Plan
http://www.un.org/ga/president/63/commission/financial_commission.shtml
Following the break out of the financial crisis that originated, in 2008, in the most advanced countries, and then spread over to the emerging economies and less developed countries, the President of the United Nations General Assembly convened a panel of experts to discuss the large array of issues related to it.
In the same breath, the President of the United Nations General Assembly established a Commission of Experts whose mandate is to reflect on the causes of the crisis, assess impacts on all countries and suggest adequate responses as to avoid its recurrence and restore global economic stability.
The Commission will seek to identify the broad principles underlying needed institutional reforms required to ensure sustained global economic progress and stability which will be of benefit to all countries, developed and less developed. It will suggest a range of credible and feasible proposals for reforming the international monetary and financial system, in the broad interest of the international community, and identify and evaluate the merits and limitations of alternatives that are at the center of current global debate.
The Commission will thus produce a report on recommendations to be considered in the preparatory process leading to the Conference at the highest level on the world financial and economic crisis and its impact on development called for in the final document adopted at Doha in December 2008 (resolution A/RES/63/239).
[Use the menu in the box on the right for more information about the Commission]
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