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Combining International Monetary Reform with Commodity Buffer Stocks : Keynes, Graham and Kaldor

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Central to John Maynard Keynes (1941) original Bretton Woods proposal was an international clearing union that would issue a new international currency by fiat called bancor. Among other functions, this international central bank would finance the stabilization of individual commodity prices through commodity buffer stocks.

Benjamin Graham’s (1944) proposal to Bretton Woods was to also create a new international currency, different from gold or a key country currency, but this new currency would be fully backed by a basket of raw materials. This commodity reserve currency would not only serve in international payment and settlement between central banks, but could be used privately and issued privately through the production of commodities. Both plans went nowhere. In 1964 at the first UNCTAD meeting Nicholas Kaldor revitalized the Graham proposal for international monetary reform and a commodity reserve currency. He addressed the growing crisis in global imbalances between industrialized nations and the under development of nations dependent on commodities for export income. All three proposals were attempts to resolve global imbalances, offer an anchor to real exchange rates, tame cost-push inflation, promote free trade, allow autonomous employment and credit policies, and provide the resource security necessary for equitable robust growth and world peace. In 1972 Kaldor thought that the commodity reserve currency was 20 years ahead of its time. This paper suggests that it remains a futuristic goal rather than something for an outdated era.