Is it time for Bretton Woods II?
While it appears unlikely that the Chinese yuan will replace the dollar as the reserve currency, Bloomberg columnist Philip Coggan proposes that there should be some consideration to pursue an arrangement less formal than Bretton Woods.
He notes that in November 2010, World Bank head Robert Zoellick suggested countries move toward an agreement on structural reforms to boost growth, forswear currency intervention and “consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
What would such a system look like? “If the U.K. set the terms of the gold standard, and the U.S. set those of Bretton Woods, then the terms of the next financial system are likely to be set by the world’s biggest creditor: China. And that system may look a lot different to the one we have become used to over the past 30 years,” writes Coggan.