Chapter 14: The Architectural Solution: Reforming the World’s Money
The 1950–73 global golden age of economic development required international institutions and policies that operated on principles inherent in Keynes’s 1940s proposals for a new international payments system. The analysis of the last ﬁve chapters of this volume has provided the theoretical foundations for comprehending the need for (a) reforming the world’s money in the twenty-ﬁrst century and (b) updating Keynes’s original proposal for a postwar international monetary scheme 14.1 REFORMING THE INTERNATIONAL PAYMENTS SYSTEM In the twenty-ﬁrst century interdependent world economy, a substantial degree of economic cooperation among trading nations is essential. Keynes’s original ‘bancor’ plan for reforming the international payments system required the creation of a single supranational central bank. At this stage of the evolution of world politics, however, a global supranational central bank is politically neither feasible1 nor necessary. The following Post Keynesian proposal does not require the establishment of a supranational central bank even if this is believed desirable on other grounds. The clearing union institution suggested in this chapter is a more modest proposal aimed at obtaining an international agreement that does not require surrendering national control of either local banking systems or domestic monetary and ﬁscal policies. Each nation will still be able to determine the economic destiny that is best for its citizens without fear of importing deﬂationary repercussions from their trading partners. Nor will each nation be able to export domestic inﬂationary forces to their international neighbors. What is required is a closed, double-entry bookkeeping clearing...
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