The great devastation after World War II comes to mind after the war. new money order It raised the question of how it would work.

It was organized in 1944 to find an answer to this question and prevent a possible economic crisis, in which 44 countries participated. At the Bretton Woods ConferenceWith a detailed report from Keynes, “Bancor” He presented a proposal for a currency called

Bancor was envisioned by Keynes as a common currency used by states.

Keynes is part of Bancor, an organization like the World Central Bank, and on its own for payments from states to each other recommended its use.

It would become the reserve currency of the world.

Values ​​of other currencies as Bancor would be assumed indexed to Bancor would be expressed.

The basic logic was that countries’ currencies were pegged to a currency called Bancor rather than the gold standard they are currently pegged to.

In this way, each country can use its own currency. By pinning it to Bancor would limit the volatility (volatility) in terms of fluctuation within a certain limit.

Limiting fluctuations would also help countries maintain their external balance in international trade.

In other words, the goal is to balance the exchange rate disparity between the countries with a foreign trade deficit and a foreign trade surplus. to balance inequality.

Unfortunately, Bancor was not a method that would work for countries with large foreign trade surpluses, such as the United States.

While the currency proposed by Keynes creates an advantage for countries with a foreign trade deficit, it also imposes sanctions on countries with a foreign trade surplus to ensure equality. a disadvantage for America was creating.

Bancor was not accepted at the Bretton Woods conference as a result of the United States’ strong opposition to this idea.

US Treasury chief economist Harry Dexter White opposed Keynes’s proposal and recommended the creation of institutions such as the World Bank and the IMF. tied to the US dollar He proposed a fixed exchange rate system.

With the system proposed by White, the US dollar indirectly became a reserve currency of sorts.

half way through the trip

Finally Bancor is replaced by US dollars, The Fed replaced the central bank. The IMF and the World Bank would act as institutions that would monitor and protect this system.

What do you think if the Bancor proposed by Keynes is accepted? How would it change?