This comment was posted here, last night by someone called Nick Sampays:
It seems our political leaders including some economists on the left are very sceptical regarding the introduction of a world currency. Principally due to discrepancies between debtor and creditor nations. Paschal Lamy director general of the WTO FROM 2005 to 2013 said
“The utopian idea of Bancor was vetoed in 1941; and if raised again by Keynesians now, it will suffer the same fate.”
This statement reflects his skepticism about reviving Keynes's idea of the Bancor, an international currency unit proposed at the Bretton Woods Conference by John Maynard Keynes. Lamy made this remark to emphasise the political impracticality of such global monetary reforms, both historically and in the present.
It would be interesting to hear counter arguments.
This is a subject that has come up several times of late, so let me give that a try.
There are those, including on the left, who suggest that the idea of a global currency, like Keynes's Bancor, is politically impossible. The reason usually given is that debtor and creditor nations have such divergent interests that no agreement could ever be reached, but I think that is wrong, and even dangerously so.
First, Keynes did not propose the Bancor as a universal currency for everyday use. It was intended to be a unit of account between countries – a means for settling international trade that did not rely on any one national currency. It was designed to prevent global imbalances by making both surplus and deficit nations take responsibility for restoring stability. There is nothing utopian about that.
Second, the idea failed not because it was unworkable, but because the most powerful creditor nation at the time, the United States, rejected it. Keynes lost the argument to Harry White, who represented the USA. That was a political decision, not an economic one. The result is the world we have now: a global economy distorted by dollar dominance, where surplus countries face no pressure to rebalance and debtor countries are forced into austerity. This is not a stable or fair system. It is simply one that has long suited existing power, even if Trump is now questioning the consequence.
Third, there is no good reason why this should be accepted as inevitable. The problems Keynes identified remain. The issues of persistent trade imbalances, currency volatility, and a global financial system that serves the strong and punishes the weak are all still prevalent. The need for a global international clearing mechanism, built on shared rules and mutual obligation, remains as relevant as ever.
The conclusion is obvious. The Bancor was not a dream. It was a genuine and practical proposal to create balance in the global economy. If we want fairness, stability, and international economic justice, then we need to revisit ideas like this and not dismiss them not just because they challenge the current order, but precisely because that is what they, necessarily do.
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There are people within the Trump administration who know that the dollar being the global reserve currency is causing them problems, and looking to rectify the situation, albeit in the half arsed, amateur way typical of his admin.
Any connection with The Bank for International Settlements which has sovereign immunity?
https://en.wikipedia.org/wiki/Bank_for_International_Settlements
“Bank for International Settlements: The Most Notorious Cartel on the Planet. Part 1.”
https://www.youtube.com/watch?v=C1_0s7BlhpA
https://www.youtube.com/shorts/K0-2P13c8kE
Essentially, no.
Agreed – the way trade is done is more like how the Mafia does business – it’s all about leveraging your position, making an offer the other side cannot refuse with menaces.
Agreed – the way trade is done is more like how the Mafia does business – it’s all about leveraging your position, making an offer the other side cannot refuse with menaces.
The USA is now the world’s most powerful debtor nation. What were Harry White’s arguments against bancor then and do they still apply.
“Bancor, anyone?”
My answer would be no. Not because it is impractical, but because it will be hijacked by powerful countries ( like the UN is). Perhaps trade between nations is better left to bilateral agreements?
Perhaps I’m wrong, but that will depend on whether someone can show me a way to prevent the above.
You have the wrong logic.
You are looking for perfection. It does not exist. Look for what is better and possible. That is what we have to do.
Thank you for your replies to both my posts. I understand you points, but your answers confirm my suspicions that Bancor, in time, will be no different than the dollar or the pound before it.
On that basis, I believe decentralisation, is better than what we have now, and what Bancor may become
To add to my other post I quote from your blog
“International Clearing Union (ICU)
A new global institution, the **International Clearing Union**, would manage Bancor issuance and settlement of international balances.”
All trade would be settled in Bancors, rather than gold or national currencies like the dollar or pound.
“Balanced Trade Mechanism
Keynes wanted both surplus and deficit countries to bear responsibility for correcting trade imbalances.
The ICU would impose penalties on both:
Countries with persistent deficits (who draw too much Bancor)
Countries with persistent surpluses (who hoard Bancor and restrict global liquidity)
This was revolutionary: surplus countries, like the U.S. at the time, would also be **pressured to adjust.**”
Please explain how countries would be “pressured to adjust”. How has that worked with Israel and it current genocidal war?
That would have to be negotiated…
If this was impractical in 1946 it’s even harder now; the explosion of cross border trade makes it so.
We should remember that trade is not between countries but between people and companies (from different countries). They will (and should) decide which currency to transact in. They will then choose whether to hold or convert to local currency. This decision, along with CB choices of where to hold FX reserves will be made in the light of exchange rates and other things.
Coercing
Oops. Pressed send to early.
Coercing people – and it would require coercement – to use Bancor as a transactional medium seems unlikely and probably undesirable.
CBs might agree but it seems unlikely….. Particularly in a fiat world without gold as an anchor.
Better to encourage wider use of non-dollar currencies where the infrastructure already exists.
But that would be Bancor…
I wonder if a practical solution might be to gradualy extend the role and use of Special Drawing Rights? This would turn the International Monetary Fund into something a little more useful than at present.
“but precisely because they is what they, necessarily do.”
Should it not be: “but precisely because that is what they, necessarily do.”???
LOL! LOL!
There’s still a human being writing this blog…
The perfect time to cancel all debt – start over?
That is, I think, impossible.
I think that, until we advance enough globally to not just accept the notion of a balanced global economy and the developments that might flow from it, but actually to implement it, we are not going to be able to properly address the question of human survival in the face of climate change, resource depletion et al, because doing so requires a degree of active global cooperation that is simply beyond the capacities of human society and government at present. Growing up about economics would be a good start along the road to enabling our survival.