Resurrecting Keynes to Revamp the International Monetary System
There is a broad consensus that the current, large US current-account deficits financed with foreign capital inflows at low interest rates cannot continue forever; there is much less consensus on when the system is likely to end and how badly it will end. The paper resurrects the basic principles of the plan Keynes wrote for the Bretton Woods Conference to propose an alternative to the current international monetary system. We 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. The new international money would be created against domestic earning assets of the Fed and the ECB. In addition to recording credit and debit entries of the supranational bank money, the new agency would determine the size of quotas, the size and time length of overdrafts, and the coordination of monetary policies. The substitution of supranational bank money for dollars would harden the external constraint of the United States and resolve the n-1 redundancy problem.
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- Barry Eichengreen, 2004.
"Global Imbalances and the Lessons of Bretton Woods,"
NBER Working Papers
10497, National Bureau of Economic Research, Inc.
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- Barry Eichengreen, 2005. "Global imbalances and the lessons of Bretton Woods," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
- Michele Fratianni & Andreas Hauskrecht, 1998. "From the Gold Standard to a Bipolar Monetary System," Open Economies Review, Springer, vol. 9(1), pages 609-636, January.
- Mundell, Robert, 2005.
"The case for a world currency,"
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Elsevier, vol. 27(4), pages 465-475, June.
- Lilia Costabile, 2007. "Current Global Imbalances and the Keynes Plan," Working Papers wp156, Political Economy Research Institute, University of Massachusetts at Amherst.
- 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.
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