mick silver
9th November 2010, 03:27 AM
http://www.reuters.com/article/idUSSGE6A70A720101108 ... * World Bank chief urges G20 currency cooperation
* Zoellick says gold could be used as reference point
* Gold price briefly hits record but move is small
* ECB chief Trichet says central bankers not discussing idea
(adds comments by ECB chief, German official, analysis)
LONDON, Nov 8 (Reuters) - Leading economies should consider adopting a modified global gold standard to guide currency rates, World Bank president Robert Zoellick said on Monday in a surprise proposal before a potentially acrimonious G20 summit.
Writing in the Financial Times, Zoellick called for a new system of floating currencies as a successor to the Bretton Woods fixed-exchange rate regime, which broke down in the early 1970s and involved measuring currency rates against gold.
The former U.S. trade representative, who served in several Republican administrations, said the new system "is likely to need to involve the dollar, the euro, the yen, the pound and (a Chinese yuan) that moves towards internationalisation and then an open capital account.
"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," he added.
Zoellick did not spell out in detail how this system might work, but said it would help to rebuild the confidence of financial markets and the general public in the global monetary system after the financial crisis.
However, policymakers appeared cool to the idea of returning to a gold standard, while many analysts said they doubted it would be implemented given practical difficulties.
European Central Bank President Jean-Claude Trichet said central bankers from around the world did not discuss returning to a gold standard at a meeting of the Bank for International Settlements in Switzerland on Monday.
"In my memory such an idea was mentioned a long time ago by Jim Baker when he was a (U.S.) Secretary of Treasury in the 1980s. I have no particular comment," Trichet told a news conference. [ID:nSLA8ME6HX]
A German government official, speaking on condition of anonymity, said Zoellick was correct in worrying that currency values were becoming too vulnerable to the whims of governments, but added that the idea of a new gold standard was impractical.
"The diagnosis that Zoellick is making is correct: that monetary policy is becoming overly politicised," the official said. "The system, as it is, is not functioning well."
* Zoellick says gold could be used as reference point
* Gold price briefly hits record but move is small
* ECB chief Trichet says central bankers not discussing idea
(adds comments by ECB chief, German official, analysis)
LONDON, Nov 8 (Reuters) - Leading economies should consider adopting a modified global gold standard to guide currency rates, World Bank president Robert Zoellick said on Monday in a surprise proposal before a potentially acrimonious G20 summit.
Writing in the Financial Times, Zoellick called for a new system of floating currencies as a successor to the Bretton Woods fixed-exchange rate regime, which broke down in the early 1970s and involved measuring currency rates against gold.
The former U.S. trade representative, who served in several Republican administrations, said the new system "is likely to need to involve the dollar, the euro, the yen, the pound and (a Chinese yuan) that moves towards internationalisation and then an open capital account.
"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," he added.
Zoellick did not spell out in detail how this system might work, but said it would help to rebuild the confidence of financial markets and the general public in the global monetary system after the financial crisis.
However, policymakers appeared cool to the idea of returning to a gold standard, while many analysts said they doubted it would be implemented given practical difficulties.
European Central Bank President Jean-Claude Trichet said central bankers from around the world did not discuss returning to a gold standard at a meeting of the Bank for International Settlements in Switzerland on Monday.
"In my memory such an idea was mentioned a long time ago by Jim Baker when he was a (U.S.) Secretary of Treasury in the 1980s. I have no particular comment," Trichet told a news conference. [ID:nSLA8ME6HX]
A German government official, speaking on condition of anonymity, said Zoellick was correct in worrying that currency values were becoming too vulnerable to the whims of governments, but added that the idea of a new gold standard was impractical.
"The diagnosis that Zoellick is making is correct: that monetary policy is becoming overly politicised," the official said. "The system, as it is, is not functioning well."