On The Supernational Currency-Trading Bank Suggested By Keynes

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John Maynard Keynes had an idea for a world currency system not based on gold– or on the U.S. dollar for that matter…

Keynes, describing what he called “the ideal international currency system of the future,” imagined a Supernational Bank which would hold the currency reserves of the world’s countries.  Every nation would have the obligation to buy and sell its domestic money “on prescribed terms in exchange for balances at a Supernational Bank.”  He felt that such bank might contribute “to the solution of the currency problem of the world.”

I like to imagine this being done with great flair… racetrack style, no less.  As you may know, at a racetrack, the odds are posted digitally on the Big Board for all to see, and they are updated close to real time, the odds going up or down every few minutes on a particular horse depending on how much money is bet for and against that horse.

Something similar could be done with currencies.  As more of a particular currency is purchased and sold, the “big board” would reflect this.  Along with this information would be the updated balance of the reserves now backing that currency.  Furthermore, the make-up of the reserves could be broken down to show how much of the reserves are in dollars, how much in gold, et cetera.

I was surprised to learn that countries still hold substantial gold reserves.  I thought currency was all fiat and/or simply pegged to the dollar or other currencies.

Apparently, the purpose reserves serve today is to act as a hedge against currency woes and political turbulence.  Still, I don’t think any country pegs its currency value to gold or silver anymore.

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