The world currency Bancor
Bancor was part of Keynes’ plan for the unity of the international monetary system after the Second World War. The Bancor price would be determined in terms of gold, and the prices of all currencies would be expressed in it.
Along with the introduction of Bancor, Keynes also proposed the creation of the International Clearing Union, which would handle the mutual debts of central banks. These proposals were formulated in Keynes’ report at the Bretton Woods Conference.
The currency would replace the national currencies in the international settlement and become the reserve currency of the world.
Keynes’ plan envisaged the creation of automatic credit lines for countries with a balance of payments deficit.
Bretton Woods and the Bancor
Keynes’ ideas became the official British proposal at the Bretton Woods Conference, but it was not accepted. Instead of a supranational currency, the conference adopted a system of fixed exchange rates, ultimately tied to physical gold, in a system administered by the World Bank and the IMF.
In practice, the system implicitly established the US dollar as a reserve currency, convertible into other currencies. The dollar was implicitly set as a reserve currency by the large US trade surplus and gold reserves at the time of the conference.
Since the outbreak of the financial crisis in 2008, Keynes’s proposal has been revived. In March 2009, Zhou Xiaochuan, the governor of the People’s Bank of China, called Keynes’ Bancor approach “farsighted”, during a speech entitled “Reforming the International Monetary System”.