HONG KONG (MarketWatch) –- The president of the World Bank said in a newspaper editorial Monday that the Group of 20 leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world’s foreign-exchange regime.
World Bank President Robert Zoellick speaks at an event in Washington in October.
World Bank chief Robert Zoellick said in an article the Financial Times that leading economies should consider “employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
Zoellick made the proposal as part of reforms to be considered at this week’s G-20 meeting in Seoul.
“Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,” said Zoellick.
He said such a reform would reflect economic realities and should be considered as a successor to the existing global currency paradigm known as “Bretton Woods II.”
Zoellick said a return to some sort of currency link to gold would be “practical and feasible, not radical.”Bretton Woods II refers to the system which began in 1971, when U.S. President Nixon ended the dollar’s link to gold as established under the Bretton Woods agreement.
“This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalization and then an open capital account,” he said.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.