Bancor

Bancor

Overview

The Bancor was a supranational currency that John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 and E. F. Schumacher
E. F. Schumacher
Ernst Friedrich "Fritz" Schumacher was an internationally influential economic thinker, statistician and economist in Britain, serving as Chief Economic Advisor to the UK National Coal Board for two decades. His ideas became popularized in much of the English-speaking world during the 1970s...

 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
International Clearing Union
The International Clearing Union 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...

– which would also have to be founded. The Bancor was to be backed by barter and its value expressed in weight of gold.
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The Bancor was a supranational currency that John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

 and E. F. Schumacher
E. F. Schumacher
Ernst Friedrich "Fritz" Schumacher was an internationally influential economic thinker, statistician and economist in Britain, serving as Chief Economic Advisor to the UK National Coal Board for two decades. His ideas became popularized in much of the English-speaking world during the 1970s...

 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
International Clearing Union
The International Clearing Union 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...

– 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
Zhou Xiaochuan
Zhou Xiaochuan is a Chinese economist, banker, reformist and bureaucrat. As governor of the People's Bank of China since December 2002, he has been in charge of the monetary policy of the People's Republic of China....

, the governor of the People's Bank of China
People's Bank of China
The People's Bank of China is the central bank of the People's Republic of China with the power to control monetary policy and regulate financial institutions in mainland China...

 called Keynes's bancor approach "farsighted" and proposed the adoption of International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 (IMF) Special Drawing Rights
Special Drawing Rights
Special Drawing Rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund . Not a currency, SDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged...

 (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
Triffin dilemma
The Triffin dilemma 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...

 - 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. A similar analysis can be found in the Report of the United Nation's "Experts on reforms of the international monetary and financial system" as well as in the IMF's study published on April 13, 2010 http://www.imf.org/external/np/pp/eng/2010/041310.pdf

See also

  • International Clearing Union
    International Clearing Union
    The International Clearing Union 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...

  • United Nations Monetary and Financial Conference
    United Nations Monetary and Financial Conference
    The United Nations Monetary and Financial Conference, commonly known as the Bretton Woods conference, was a gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire, to regulate the international monetary and financial order after...

  • John Maynard Keynes
    John Maynard Keynes
    John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

  • IMF Special Drawing Rights (SDRs)
    Special Drawing Rights
    Special Drawing Rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund . Not a currency, SDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged...