{{Short description|Formerly proposed currency}} {{More citations needed|date=March 2009}} {{Use dmy dates|date=April 2026}} thumb|John Maynard Keynes
The '''bancor''' was a supranational currency that John Maynard Keynes and E. F. Schumacher<ref>{{cite journal | url = http://www.centerforneweconomics.org/documents/copy-e-f-schumacher-multilateral-clearing-economica-new-series-vol-10-no-38-may-1943-pp-15 | author = E. F. Schumacher | author-link = E. F. Schumacher | title = Multilateral Clearing | journal = Economica | volume = 10 | number = 38 | date = May 1943 | pages = 150–165 | doi = 10.2307/2549461 | jstor = 2549461 | accessdate = 2015-11-15 | archive-url = https://web.archive.org/web/20150923201757/http://www.centerforneweconomics.org/documents/copy-e-f-schumacher-multilateral-clearing-economica-new-series-vol-10-no-38-may-1943-pp-15 | archive-date = 23 September 2015 | url-status = dead | url-access = subscription }}</ref> conceptualised in the years 1940–1942<ref>{{Cite book |last=Kallianiotis |first=J. |url=https://www.google.com/books/edition/Exchange_Rates_and_International_Financi/MenQAQAAQBAJ?hl=en&gbpv=1&dq=Keynes+bancor+conceptualized+1940&pg=PT65&printsec=frontcover |title=Exchange Rates and International Financial Economics: History, Theories, and Practices |date=2013-10-02 |publisher=Springer |isbn=978-1-137-31888-6 |language=en}}</ref> and which the United Kingdom proposed to introduce after World War II.<ref>{{Cite book |last=Sinn |first=Hans-Werner |url=https://www.google.com/books/edition/The_Economics_of_Target_Balances/W-oEEAAAQBAJ?hl=en&gbpv=1&dq=Keynes+bancor+UK+official+Bretton+Woods+proposal&pg=PA21&printsec=frontcover |title=The Economics of Target Balances: From Lehman to Corona |date=2020-10-23 |publisher=Springer Nature |isbn=978-3-030-50170-9 |language=en}}</ref> The name was inspired by the French ''banque or'' ('bank gold').<ref name="steil-2013">{{cite book |last=Steil |first=Benn |author-link=Benn Steil |date=2013 |title=The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order |location=Princeton |publisher=Princeton University Press |isbn=978-0691162379 |pages=143–144}}</ref><ref>{{Cite book |last=Caldentey |first=Esteban Pérez |url=https://www.google.com/books/edition/Roy_Harrod/-tCuDwAAQBAJ?hl=en&gbpv=1&dq=Bancor+French+banque+or+('bank+gold')%22&pg=PA315&printsec=frontcover |title=Roy Harrod |date=2019-09-10 |publisher=Springer Nature |isbn=978-1-349-74085-7 |language=en}}</ref> This newly created supranational currency would then be used in international trade as a unit of account within a multilateral clearing system—the International Clearing Union—which would also need to be founded.
==Overview== John Maynard Keynes proposed an explanation for the ineffectiveness of monetary policy to stem the Great Depression, as well as a non-monetary interpretation of the depression, and finally an alternative to a monetary policy for meeting the depression. Keynes believed that in times of heavy unemployment, interest rates could not be lowered by monetary policies.<ref>{{Cite book |last=Friedman |first=Milton |url=https://www.google.com/books/edition/The_Optimum_Quantity_of_Money/qlUPEAAAQBAJ?hl=en&gbpv=1&dq=Keynes+believed+heavy+unemployment+interest+rates+not+lowered+monetary+policy&pg=PA96&printsec=frontcover |title=The Optimum Quantity of Money |date=2017-10-23 |publisher=Routledge |isbn=978-1-351-47809-0 |language=en}}</ref> The ability for capital to move between countries seeking the highest interest rate frustrated Keynesian policies. By closer government control of international trade and the movement of funds, the Keynesian policy would be more effective in stimulating individual economies.<ref name=":1" />
Bancor would not be an international currency. It would rather be a unit of account used to track international flows of assets and liabilities, which would be conducted through the International Clearing Union. Gold could be exchanged for bancors, but bancors could not be exchanged for gold. Individuals could not hold or trade in bancor. All international trade would be valued and cleared in bancor. Surplus countries with excess bancor assets and deficit countries with excess bancor liabilities would both be charged to provide symmetrical incentives on them to take action to restore balanced trade.<ref name=":1">{{Cite book |last=Rivera |first=Joseph de |url=https://www.google.com/books/edition/Forming_a_Global_Community/D56LEAAAQBAJ?hl=en&gbpv=1&dq=All+international+trade+would+be+valued+and+cleared+in+bancor&pg=PA11&printsec=frontcover |title=Forming a Global Community |date=2022-10-18 |publisher=Vernon Press |isbn=978-1-64889-538-8 |language=en}}</ref> In the words of Benn Steil,
<blockquote>Each item a member country exported would add bancors to its ICB account, and each item it imported would subtract bancors. Limits would be imposed on the amount of bancor a country could accumulate by selling more abroad than it bought, and on the amount of bancor debt it could rack up by buying more than it sold. This was to stop countries building up excessive surpluses or deficits. Each country's limits would be proportional to its share of world trade ... Once initial limits had been breached, deficit countries would be allowed to depreciate, and surplus countries to appreciate their currencies. This would make deficit country goods cheaper, and surplus country goods more expensive, with the aim of stimulating a rebalancing of trade. Further bancor debit or credit position breaches would trigger mandatory action. For chronic debtors, this would include obligatory currency depreciation, rising interest payments to the ICB Reserve Fund, forced gold sales, and capital export restrictions. For chronic creditors, it would include currency appreciation and payment of a minimum of 5 percent interest on excess credits, rising to 10 percent on larger excess credits, to the ICB's Reserve Fund. Keynes never believed that creditors would actually pay what in effect were fines; rather, he believed they would take the necessary actions ... to avoid them.<ref name="steil-2013"/></blockquote>
==Bretton Woods Conference== [[File:Harry D. White, Director of Monetary Research for the U.S. Treasury (3x4 cropped).jpg|thumb|Harry D. White, Director of Monetary Research for the U.S. Treasury]] Keynes's proposal became the United Kingdom's official proposal at the Bretton Woods Conference, but it was not accepted.<ref>{{Cite news|url=https://www.economist.com/finance-and-economics/2020/04/11/should-the-imf-dole-out-more-special-drawing-rights|title=Should the IMF dole out more special drawing rights?|newspaper=The Economist|access-date=2020-04-12|issn=0013-0613}}</ref><ref>{{Cite book |last=Steil |first=Benn |url=https://www.google.com/books/edition/The_Battle_of_Bretton_Woods/M7a92gR6ngUC?hl=en&gbpv=1&dq=Bretton+Woods+bancor+reject&pg=PA144&printsec=frontcover |title=The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order |date=2013-02-24 |publisher=Princeton University Press |isbn=978-0-691-14909-7 |language=en}}</ref>
==Proposed revival== Since the 2008 financial crisis, Keynes's proposal has been revived. Its proponents have argued that since the end of the Bretton Woods system when the United States dollar was unpegged from gold, the United States was incentivized to run high government spending and high deficits, which made the global financial system unstable.<ref name=":0" /> 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 the 2008 financial crisis. U.S. Secretary of the Treasury Timothy Geithner expressed interest in the idea of greater use of SDRs as a reserve. However, he was criticized severely for this in the United States, and the dollar lost 5 cents against the euro in exchange markets following his statements.<ref name=":0">Tooze, Adam (2018). ''Crashed: How a Decade of Financial Crises Changed the World''. New York, New York: Viking Press. p. 266. {{ISBN|978-0-670-02493-3}}. {{OCLC|1039188461}}.</ref> He and President Barack Obama shortly afterwards backtracked Geithner's comments.<ref name=":0"/><ref>{{Cite news|last=MarketWatch|first=Lisa Twaronite, Polya Lesova, &, William L. Watts|title=Dollar pares losses after Geithner clarification|url=https://www.marketwatch.com/story/dollar-pares-losses-after-geithner-clarifies|access-date=2022-01-29|website=MarketWatch|language=EN-US}}</ref>
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.<ref> {{Cite web | author = Zhou Xiaochuan | author-link = Zhou Xiaochuan | title = Reform the International Monetary System | work = BIS Review | publisher = Bank of International Settlements | year = 2009 | url = http://www.bis.org/review/r090402c.pdf | doi = | accessdate = 28 November 2010 }} </ref><ref>{{Cite news|url=https://www.ft.com/content/7851925a-17a2-11de-8c9d-0000779fd2ac|title = China calls for new reserve currency|newspaper = Financial Times|date = 24 March 2009}}</ref> A similar analysis can be found in the Report of the United Nation's "Experts on reforms of the international monetary and financial system"<ref>[https://digitallibrary.un.org/record/653789?ln=en "Recommendations by the Commission of Experts of the President of the General Assembly on reforms of the international monetary and financial system"] (20 March 2009).</ref> as well as in the IMF's study published on 13 April 2010.<ref>[http://www.imf.org/external/np/pp/eng/2010/041310.pdf "Reserve Accumulation and International Monetary Stability"] (13 April 2010).</ref>
==See also== {{Portal|Money}} * Spesmilo * Triffin dilemma
==References== {{Reflist}}
==Further reading== {{Library resources box}}
* {{cite book |author=John Maynard Keynes |title=The Collected Writings, Volume XXV: Activities, 1940–44: Shaping the Post-war World: The Clearing Union |publisher= |location=Basingstoke |year=1980 }} * {{cite book |author=Armand van Dormael |title=Bretton Woods. Birth of a Monetary System. |publisher= |location=London |year=1978 |isbn=978-0-8419-0326-5 }}
== External links == * {{wikinews inline|Asian countries call for global currency}}
Category:Alternative currencies Category:Gold standard Category:Keynesian economics Category:Proposed currencies Category:International Monetary Fund Category:World Trade Organization