In the Financial Times the World Bank chief Robert Zoellick advising that the world currency needs to be changed. He said that the US dollar must be used less as the world’s currency and much more of that role should be transferred to a gold standard. The suggestion comes as the US Federal Reserve conducted more “quantitative easing”. Judging from the wording, Zoellick is worried about the future of the economy.
“With talk of currency wars and disagreements over the US Federal Reserve’s policy of quantitative easing, the summit of the Group of 20 leading economies in Seoul this week is shaping up as the latest test of international cooperation.”
The US is currently attempting to pressure China into revaluating its currency in order to stimulate US exports. The move is causing international hostility as China is unwilling to place its self at a disadvantage. Right now the US is trying to bring around European and Asian allies to pressure China into compliance. The problem is the quantitative easing is harming other nations as well. It seems that Zoellick is trying to protect the system from the United States.
The US has an inordinate amount of power in the world financial system because the US dollar is most of the world’s currency reserve. Not all of it though, some of it is backed up by gold. Zoellick is suggesting that much more of it go to gold in order to limit US power. He is also calling for a “cooperative monetary system”.
“should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although text books may view gold as the old money, markets are using gold as an alternative money asset today.”
The plan here is to basically create a “cooperative currency” where no one nation has a majority control over it. The problem is that this will not solve the contradictions of the capitalist system. It is competition itself that causes hostility, fragility in exchange and the violent grabbing of resources.
This will not solve the current currency crisis. If such a measure is to be taken it will lessen US power in the world financial system. It is not known how the US government will react to this article, but we do know they will not be happy about the suggestion that they lose power.