International Clearing Union

International Clearing Union

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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
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...

 at Bretton Woods, New Hampshire
Bretton Woods, New Hampshire
Bretton Woods is an area within the town of Carroll, New Hampshire, USA, whose principal points of interest are three leisure and recreation facilities...

 by British
British people
The British are citizens of the United Kingdom, of the Isle of Man, any of the Channel Islands, or of any of the British overseas territories, and their descendants...

 economist 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...

. Its aim was to have been regulation of currency exchange, a role eventually taken by the 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).

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
Bancor
The Bancor was a supranational currency that John Maynard Keynes and E. F. Schumacher conceptualised in the years 1940-42 and which the United Kingdom proposed to introduce after the Second World War...

. The bancor was to have had a fixed exchange rate
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...

 with national currencies, and would have been used to measure the balance of trade
Balance of trade
The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...

 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's Reserve Fund
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...

; 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
George Monbiot
George Joshua Richard Monbiot is an English writer, known for his environmental and political activism. He lives in Machynlleth, Wales, writes a weekly column for The Guardian, and is the author of a number of books, including Captive State: The Corporate Takeover of Britain and Bring on the...

, 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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