World Bank offers to change dollar for gold. Will it be heard?

Market Leader informed

Robert Zoellick, the current president of the World Bank, offers to create a new currency system involving USD, AUD, GBP, JPY and CNY (Chinese Yuan) and using Gold as the market guideline.

The world’s biggest banks should think about the new gold standard of managing the currency market volatility, experts of Masterforex-V Academy say. According to Financial Times, it is gold that is used at the markets as an alternative asset.

Discontent with the global currency system is constantly growing around the world, that is why the World Bank has offered to introduce “the Bretton Woods System 2”, Mr.Zoellick says. However, despite economists’ numerous statements in favor of introducing the gold standard most policymakers believe that it will result in introducing extremely tough monetary policies, which in its turn will have a negative impact on the employment and economic growth around the world.

Maxim Gun (Santyago), the head of the Volume Analysis Department, Masterforex-V Academy, thinks that the US economic model is not the standard any more as USD keeps losing its ground versus other major currencies. The Fed Reserve is currently trying again to “artificially vaccinate” the economy by printing more dollars, which leads to the devaluation of the national currency. As a result, by now the world has accumulated a huge mass of uncovered US dollar bills. This is an ideal moment for creating another “center of gravity” inside the global economy. To his mind, the World Bank’s offer is not accidental, it is timely. From the standpoint of tech analysis, the news event may provoke the uptrend of the allied currencies against the US dollar. For example, for EUR it may indicate that the retracement is over and the upward tendency will be resumed.

 

 

 

Experts of Masterforex-V Academy note that using the national currency of a specific country as a means of international payments increases their dependence on the changes in the currency rate, as well as on the economic and currency policies pursued in the given country. International payments depend on a number of factors, i.e.:

·         Political and economic ties between the countries

·         The country’s currency legislation

·         International trade rules and regulations

·         The level of development of the country’s banking sector

·         The conditions defined according to the external-trade contracts, as well as credit instruments and agreements

It should be noted that until the beginning of the 19^th century gold was the only means of international payments. It can be explained by the fact that during the times of the gold standard national currencies were not recognized by the exporting states, making gold act as a global currency. The changes that took place in the international labor management, as well as in the concentration and specifics of production and services, and the increasing volumes of the external trading relations made the golden standard of international payment inconvenient. Gold started losing its ground as a means of global payments. When the credit relations developed, the credit money (bills, notes and checks) gradually displaced gold, first from the internal monetary circulation, then from the external trading. After the gold standard was canceled, the credit money stopped being exchanged for gold. Gold was used as a global currency only during force majeure (wars, economic shocks etc.) or when there was no other means to pay. For example, during World War 2 the international accounts were settled only by means of standard gold bullions. After the war the multilateral clearing balance (during the period of founding the European Payments Union from 1950 to 1958) was settled through transfers of gold (first 40%, starting from 1955 – 75%).

Under present-day conditions during force majeure countries exchange a certain part of their gold reserves for those currencies that act as a means of settling accounts according to the external trade contracts and credit agreements. Consequently, nowadays gold is used in international payments indirectly, through trading operations at the market of gold. Forcing gold out of the international monetary circulation favored the development of credit-money payments. The credit money of those countries with the most developed economies and the biggest share in the global trade was used to settle accounts between various countries.

Starting from the 1970s there emerged a new phenomenon in the international payment system, i.e. making use of Special Drawing Rights (SDR) and ecu (in 1999 ecu was replaced by EUR). Common currencies were introduced as the result of the demonetization of gold, collapse of the Bretton Woods System and negative consequences of devaluing the national currencies. They started being used as global currencies because they are more stable.

 

 

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