World Bank chief calls for gold standard

| Wednesday November 10, 2010 00:00

Writing in the Financial Times, Zoellick called for a 'Bretton Woods II' system of floating currencies as a successor to the Bretton Woods fixed-exchange rate regime that broke down in the early 1970s.

Gold briefly hit a record high of $1398,35 an ounce in early trade on Monday on concerns of a continued weakening dollar trend after the US Federal Reserve last week acted to resume buying Treasuries. That policy has fed acrimony among leading economies in the Group of 20 in the run-up to their summit in Seoul  today  and tomorrow. China and Germany, major exporting nations, have both decried the Fed's quantitative easing - effectively printing money - which is weakening the dollar.Investors are pumping dollars into emerging markets in search of higher yields, and the potentially destabilising impact of this, along with big current account deficits and surpluses as well as China's reluctance to let the yuan appreciate faster, are set to dominate the G20 debate.

France, which takes over the G20 chair after this week's summit, says it plans to work on a new international monetary system to bring greater currency stability.

Beijing's central bank chief has suggested an alternative monetary system based on using the International Monetary Fund's Special Drawing Rights, a notional unit of value based on a basket of major currencies, instead of the dollar as the sole global reserve currency.

Zoellick was a senior official in the US Treasury at the time of the 1985 Plaza and 1987 Louvre Accords on rebalancing currencies among major industrialised nations. He noted that that phase of currency coordination helped launch the Uruguay Round of world trade liberalisation negotiations.

While his opinion article in the Financial Times did not represent either US or World Bank policy, it may reflect a greater openness in Washington than in the last two decades to some form of international currency cooperation.-(Reuters)