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Resurrecting Keynes to Stabilize the International Monetary System

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  • Pietro Alessandrini

    ()

  • Michele Fratianni

    ()

Abstract

We adapt the basic principles of the Keynes Plan and argue for the creation of a supranational bank money that would coexist along side national currencies and for the establishment of a new international clearing union (NICU). These principles remain timely because the fundamental causes of the instability of the international monetary system are as valid today as they were in the early Forties. The new international money would be created against domestic earning assets of the Fed and the ECB. The quantity of this supranational bank money would be demand driven and thus would differ from the helicopter-money Special Drawing Rights. NICU would not hold open positions in assets denominated in national currency and consequently would not bear exchange rate risk. NICU would be more than an office where to record credit and debit entries of the supranational bank money. The financial tsunami that has hit the United States in 2007-2008 provides a unique opportunity for a coordinated strategy.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11079-008-9106-4
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 20 (2009)
Issue (Month): 3 (July)
Pages: 339-358

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Handle: RePEc:kap:openec:v:20:y:2009:i:3:p:339-358

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Keynes Plan; External imbalances; Exchange rates; International monetary system; Key currency; Supranational bank money; E42; E52; F33; F36;

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References

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  1. Nouriel Roubini & Brad Setser, 2005. "Will the Bretton Woods 2 regime unravel soon? the risk of a hard landing in 2005-2006," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  2. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc.
  3. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege," CEPR Discussion Papers 5220, C.E.P.R. Discussion Papers.
  4. Barry Eichengreen, 2004. "Global Imbalances and the Lessons of Bretton Woods," NBER Working Papers 10497, National Bureau of Economic Research, Inc.
  5. Hausmann, Ricardo & Sturzenegger, Federico, 2006. "Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations," Working Paper Series rwp06-003, Harvard University, John F. Kennedy School of Government.
  6. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
  7. Ben S. Bernanke, 2007. "Global imbalances: recent developments and prospects," Speech 317, Board of Governors of the Federal Reserve System (U.S.).
  8. Matthew Higgins & Thomas Klitgaard & Cédric Tille, 2006. "Borrowing without debt? Understanding the U.S. international investment position," Staff Reports 271, Federal Reserve Bank of New York.
  9. Mundell, Robert, 2005. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 465-475, June.
  10. Frankel, Jeffrey, 2006. "Global Imbalances and Low Interest Rates: An Equilibrium Model vs. A Disequilibrium Reality," Working Paper Series rwp06-035, Harvard University, John F. Kennedy School of Government.
  11. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
  12. repec:fip:fedgsq:y:2007:i:sep11 is not listed on IDEAS
  13. Barry Eichengreen, 1989. "Hegemonic Stability Theories of the International Monetary System," NBER Working Papers 2193, National Bureau of Economic Research, Inc.
  14. Lilia Costabile, 2007. "Current Global Imbalances and the Keynes Plan," Working Papers wp156, Political Economy Research Institute, University of Massachusetts at Amherst.
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Citations

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Cited by:
  1. Pietro Alessandrini & Michele Fratianni, 2009. "International Monies, Special Drawing Rights, and Supernational Money," Working Papers 2009-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  2. Russo, Alberto, 2012. "Elements of novelty, known mechanisms, and the fundamental causes of the recent crisis," MPRA Paper 41088, University Library of Munich, Germany.
  3. Anna M. Carabelli & Mario A. Cedrini, 2010. "“Veiling The Controversies with Dubious Moral Attitudes”? Creditors and Debtors in Keynes’s Ethics of International Economic Relations," Working Papers 127, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
  4. Pietro Alessandrini, 2013. "Il Bancor," Mo.Fi.R. Working Papers 84, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  5. Michele Fratianni, 2012. "The Future International Monetary System: Dominant Currencies or Supranational Money? An Introduction," Open Economies Review, Springer, vol. 23(1), pages 1-12, February.
  6. Steiner, Andreas, 2014. "Current account balance and dollar standard: Exploring the linkages," Journal of International Money and Finance, Elsevier, vol. 41(C), pages 65-94.
  7. Michele Fratianni & Francesco Marchionne, 2009. "The Role of Banks in the Subprime Financial Crisis," Working Papers 2009-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  8. Pietro Alessandrini & Andrea Filippo Presbitero, 2011. "Low-Income Countries Vulnerabilities and the Need for an SDR-Based International Monetary System," Mo.Fi.R. Working Papers 55, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  9. Fratianni Michele, 2008. "Financial Crises, Safety Nets and Regulation," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 169-208.
  10. Michael D. Bordo & Harold James, 2011. "Reserves and Baskets," NBER Working Papers 17492, National Bureau of Economic Research, Inc.
  11. Pietro Alessandrini & Michele Fratianni & Andrew Hughes Hallett & Andrea Presbitero, 2014. "External Imbalances and Fiscal Fragility in the Euro Area," Open Economies Review, Springer, vol. 25(1), pages 3-34, February.

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