The development of a monetary system to follow on from 1971’s Bretton Woods II will take time, but it’s time to start, World Bank President Robert Zoellick writes in the Financial Times.
This week’s summit of the Group of 20 leading economies in Seoul presents a test of international cooperation offering an opportunity for a key group of G20 countries to agree on parallel agendas of structural reform, Zoellick writes.
For instance, the U.S. and China could reach agreement on mutually reinforcing moves to stimulate further growth, such as a course for yuan appreciation, or a move to wide bands for exchange rates, the World Bank chief writes.
Other major economies should agree to forgo currency intervention, except in rare situations agreed to by others, Zoellick says. These moves would help emerging economies to deal with asymmetries in recoveries by applying flexible exchange rates and independent monetary policies, he writes.
The system should evaluate using gold as a reference point of market expectations about inflation, deflation and future currency values, Zoellick writes, noting that while textbooks may view gold as “old money,” markets use it today as an alternative monetary asset.