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The bancor was a World Currency Unit of clearing that was proposed by John Maynard Keynes, as leader of the British delegation and chairman of the World Bank commission, in the negotiations that established the Bretton Woods system, but was never implemented.[1]

It was to be initially fixed in terms of 30 commodities, of which one would be gold. It would stabilize the average prices of commodities, and with them the international medium of exchange and a store of value. Central to Keynes' proposal was to tax countries' current account surpluses, encouraging domestic demand and promoting global trade balance.[2]

The Americans made a comparable plan for reform that included a world currency called the unitas. At Bretton Woods in 1944 U.S. President Franklin D. Roosevelt told U.S. Treasury Secretary Henry Morgenthau, Jr. to prepare for an international currency to be implemented after World War II. Harry Dexter White at the U.S. Treasury formulated plans for the unitas.

In practice, until the collapse of the Bretton Woods system in 1971, gold itself filled this role, with the U.S. dollar fixed to gold and many other currencies fixed to either the U.S. dollar or directly to gold.

There have been variations on the model of the bancor recently, such to have bancors for regional trade organizations such as the North American Free Trade Agreement (NAFTA), ASEAN (Association of Southeast Asian Nations), etc. In this model the commodities that would be placed into the pool would be limited to a fixed number of the currencies of the partner nations, and this would be done on an annual basis with agreement on prerequisites for withdrawal.

2009 Comments by Zhou Xiaochuan

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' bancor approach "farsighted" and proposed the adoption of IMF SDRs as a global reserve currency as a response to the financial 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.[3][4] This renewed interest in Keynes' idea may be considered part of the 2008–2009 Keynesian resurgence.

References

See also

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