Uploaded December 2016 | Updated September 2026, 3 weeks ago
Professor Perry Mehrling discussing the Keynes Bancor Plan. The Bancor Plan was a suggestion from John Maynard Keynes about how to reconstitute the monetary system after WW2 had decimated the pre-war arrangements. Keynes's plan was to, instead of having gold used to settle international payments, use an international currency called the "Bancor," which would have been an elastic currency loaned into existence by an international central bank.
The point of the Bancor was to have fixed exchange rates but also deal with the trouble of trade imbalances, which are a problem on a fixed exchange rate. On a fixed exchange rate, trade deficits are a problem because it means you are running out of the reserve currency, so you need a trade surplus to supply them. But the burden falls on the deficit country (who will endanger their peg if they run out of reserves) and not on the surplus country (who is happily accumulating foreign reserves). Under the Bancor plan, the negative interest rate on holdings of Bancor would have encouraged surplus countries to spend down their holdings, moving towards trade balance.
However, the Bancor plan wasn't favorable to the United States, and so got nixed in the post-war negotiations. Instead, we got the Bretton-Woods agreement, the IMF, SDRs, and the Dollar Standard.
Watch the whole lecture here: coursera.org/learn/money-banking/lecture/Gv6QP/act-2-1934-1971-contradiction-between-keynesian-national-management-and-the
Take the whole course here: coursera.org/learn/money-banking/home/welcome
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Professor Perry Mehrling discussing the Keynes Bancor Plan. The Bancor Plan was a suggestion from John Maynard Keynes about how to reconstitute the monetary system after WW2 had decimated the pre-war arrangements. Keynes's plan was to, instead of having gold used to settle international payments, use an international currency called the "Bancor," which would have been an elastic currency loaned into existence by an international central bank.
The point of the Bancor was to have fixed exchange rates but also deal with the trouble of trade imbalances, which are a problem on a fixed exchange rate. On a fixed exchange rate, trade deficits are a problem because it means you are running out of the reserve currency, so you need a trade surplus to supply them. But the burden falls on the deficit country (who will endanger their peg if they run out of reserves) and not on the surplus country (who is happily accumulating foreign reserves). Under the Bancor plan, the negative interest rate on holdings of Bancor would have encouraged surplus countries to spend down their holdings, moving towards trade balance.
However, the Bancor plan wasn't favorable to the United States, and so got nixed in the post-war negotiations. Instead, we got the Bretton-Woods agreement, the IMF, SDRs, and the Dollar Standard.
Watch the whole lecture here: coursera.org/learn/money-banking/lecture/Gv6QP/act-2-1934-1971-contradiction-between-keynesian-national-management-and-the
Take the whole course here: coursera.org/learn/money-banking/home/welcome
Follow Deficit Owls on Facebook and Twitter:
facebook.com/DeficitOwls
twitter.com/DeficitOwls
