August 25, 2010
The Economic Collapse
Sometimes there are things that are so shocking that you just do not want to report them unless they can be completely and totally documented. Over the past few years, there have been many rumors about a coming global currency, but at times it has been difficult to pin down evidence that plans for such a currency are actually in the works. Not anymore. A paper entitled “Reserve Accumulation and International Monetary Stability” by the Strategy, Policy and Review Department of the IMF recommends that the world adopt a global currency called the “Bancor” and that a global central bank be established to administer that currency. The report is dated April 13, 2010 and a full copy can be read here. Unfortunately this is not hype and it is not a rumor. This is a very serious proposal in an official document from one of the mega-powerful institutions that is actually running the world economy. Anyone who follows the IMF knows that what the IMF wants, the IMF usually gets. So could a global currency known as the “Bancor” be on the horizon? That is now a legitimate question.
So where in the world did the name “Bancor” come from? Well, it turns out that ”Bancor” is the name of a hypothetical world currency unit once suggested by John Maynard Keynes. Keynes was a world famous British economist who headed the World Banking Commission that created the IMF during the Breton Woods negotiations.
The Wikipedia entry for “Bancor” puts it this way….
The bancor was a World Currency Unit of clearing that was proposed by John Maynard Keynes, as leader of the British delegation and chairman of the World Bank commission, in the negotiations that established the Bretton Woods system, but has not been implemented.
The IMF report referenced above proposed naming the coming world currency unit the “Bancor” in honor of Keynes.
So what about Special Drawing Rights (SDRs)? Over the past couple of years, SDRs have been touted as the coming global currency. Well, the report does envision making SDRs “the principal reserve asset” as we move towards a global currency unit….
“As a complement to a multi-polar system, or even—more ambitiously—its logical end point, a greater role could be considered for the SDR.”
However, the report also acknowledges that SDRs do have some serious limitations. Since the value of SDRs are closely tied to national currencies, anything affecting those currencies will affect SDRs as well.
Right now, SDRs are made up of a basket of currencies. The following is a breakdown of the components of an SDR….
*U.S. Dollar (44 percent)
*Euro (34 percent)
*Yen (11 percent)
*Pound (11 percent)
The IMF report recognizes that moving to SDRs is only a partial move away from the U.S. dollar as the world reserve currency and urges the adoption of a currency unit that would be truly international. The truth is that SDRs are clumsy and cumbersome. For now, SDRs must still be reconverted back into a national currency before they can be used, and that really limits their usefulness according to the report….
“A limitation of the SDR as discussed previously is that it is not a currency. Both the SDR and SDR-denominated instruments need to be converted eventually to a national currency for most payments or interventions in foreign exchange markets, which adds to cumbersome use in transactions. And though an SDR-based system would move away from a dominant national currency, the SDR’s value remains heavily linked to the conditions and performance of the major component countries.”
So what is the answer?
Well, the IMF report believes that the adoption of a true global currency administered by a global central bank is the answer.
The authors of the report believe that it would be ideal if the “Bancor” would immediately be used as currency by many nations throughout the world, but they also acknowledge that a more “realistic” approach would be for the “Bancor” to circulate alongside national currencies at first….
“One option is for bancor to be adopted by fiat as a common currency (like the euro was), an approach that would result immediately in widespread use and eliminate exchange rate volatility among adopters (comparable, for instance, to Cooper 1984, 2006 and the Economist, 1988). A somewhat less ambitious (and more realistic) option would be for bancor to circulate alongside national currencies, though it would need to be adopted by fiat by at least some (not necessarily systemic) countries in order for an exchange market to develop.”
So who would print and administer the “Bancor”?
Well, a global central bank of course. It would be something like the Federal Reserve, only completely outside the control of any particular national government….
“A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”
In fact, at one point the IMF report specifically compares the proposed global central bank to the Federal Reserve….
“The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present. Such liquidity was provided in the most recent crisis mainly by the U.S. Federal Reserve, which however may not always provide such liquidity.”
So is that what we really need?
A world currency administered by an international central bank modeled after the Federal Reserve?
Not at all.
As I have written about previously, the Federal Reserve has devalued the U.S. dollar by over 95 percent since it was created and the U.S. government has accumulated the largest debt in the history of the world under this system.
So now we want to impose such a system on the entire globe?
The truth is that a global currency (whether it be called the “Bancor” or given a different name entirely) would be a major blow to national sovereignty and would represent a major move towards global government.
Considering how disastrous the Federal Reserve system and other central banking systems around the world have been, why would anyone suggest that we go to a global central banking system modeled after the Federal Reserve?
Let us hope that the “Bancor” never sees the light of day.
However, the truth is that there are some very powerful interests that are absolutely determined to create a global currency and a global central bank for the global economy that we now live in.
It would be a major mistake to think that it can’t happen.