Monday, November 8, 2010

World Bank: New Monetary System To Include Gold

Robert Zoellick, President of the World Bank wrote an article on the Financial Times this weekend discussing the current global problems including quantitative easing, currency wars, and the sue of gold in the monetary system.

His points:

1. G20 should focus on fundamentals agreeing on parallel agendas of structural reforms to spur growth. US  needs to address structural spending and ballooning debt

2. The major economies should agree to forego currency intervention,

3. Steps should be created to assist emerging economies to adjust to short-term hot money flows.

4. The G20 should support growth by focusing on supply-side bottlenecks in developing countries, giving special support to infrastructure, agriculture and developing healthy, skilled labour forces.

5. The G20 should build a co-operative monetary system that reflects emerging economic conditions, involving the dollar, the euro, the yen, the pound and the renminbi. "The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values". Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.

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