Keynes proposed the Bancor system at Bretton Woods in 1944 to solve balance of payments issues and recycle trade surpluses. It would have worked like a central bank, giving each country a checking account to keep trade balances close to neutral. The world now faces major trade imbalances like debt in southern Europe and China's economic slowdown, showing the need for a new global mechanism to finance deficits. The Bancor system was rejected due to U.S. hegemony and desire to maintain surpluses. A modern version could help address issues like underdevelopment in Africa by utilizing foreign reserves held by institutions to lend for development.

1. Keir North

2. What is it?
 Idea suggested by John Maynard Keynes
at the Bretton Woods conference, 1944.
 Aimed to solve balance of payments
problems and recycle trade surpluses into
deficit countries.
 Worked like a central bank, issuing each
country with a ‘checking account’ of
Bancors; an overdraft facility of half it’s
trade volume, with incentives to keep a net
position close to zero Bancors by the end
of each year (i.e. A neutral balance of
trade).

3. Importance of controlling Trade
imbalances
 The world is in a state of disequilibrium
following 20008; EU periphery states
debt, China’s slowdown, Africa’s
underdevelopment, UK and US long run
reliance on capital inflows to finance
huge deficits.
 The need for a new ‘Global Surplus
Recycling Mechanism’ to finance
growing deficits

4. The ‘Global Minotaur’

5. The ‘wounded’ minotaur

6. Greece

7. Why was it rejected In
1944?
 U.S Hegemony and their envisioned
‘Global Plan’.
 No interest in restraining their surpluses

8. Strengths it might have
today
 It is clear a new system on a global
scale is needed. The U.S can no longer
continue to absorb the world’s capital
outflows, and so China cannot create
sufficient demand for it’s goods abroad.
Africa’s underdevelopment.
 Utilise foreign reserves (ICU could lend
deposits for a variety of purposes)
 Might facilitate further ambitious
proposals; e.g. Progressive wealth tax.