PARIS (MNI) – The world’s biggest economies should consider
returning to some form of gold standard to anchor global currencies,
World Bank President Robert Zoellick said in an opinion piece published
over the weekend.
Writing in the Financial Times, Zoellick argued that a replacement
is needed for the current system of floating exchange rates that has
been in place since the 1971 breakdown of the post-war Bretton Woods
System, in which the dollar and other currencies were tied to the value
of gold.
A new system would need “to involve the dollar, the euro, the yen,
the pound and a renminbi that moves towards internationalisation, and
then an open capital account,” Zoellick wrote. “The system should also
consider employing gold as an international reference point of market
expectations about inflation, deflation and future currency values,” he
added.
Zoellick’s proposal comes at a time of heightened global tension
over exchange rates, with China under fire for not moving faster to
allow its currency to appreciate and the U.S. under increasing attack
for the recent decision of the Federal Reserve to buy $600 billion worth
of U.S. Treasuries to stimulate the economy.
Germany’s Finance Minister Wolfgang Schaeuble blasted the Fed’s
move, saying it was akin to currency manipulation and was “inconsistent”
with U.S. calls on China to stop manipulating the yuan. Schaeuble said
U.S. financial policy was “in deep crisis.”
The Chinese have also criticized U.S. policy in recent days.
The latest salvos come as the G20 leaders prepare for their summit
in Seoul later this week, a meeting that is expected to be rather
contentious.
“The scope of the changes since 1971 certainly matches those
between 1945 and 1971 that prompted the shift from Bretton Woods I to
[the current system],” Zoellick wrote. “Although textbooks may view gold
as the old money, markets are using gold as an alternative monetary
asset today,” he noted.
–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com
[TOPICS: M$$FX$,M$$CR$,MGX$$$,MI$$$$]
