Keynes on the Bancor

Economics Economics Questions
1

This question is directed explicitely to those who have read The General Theory. I own a copy, but have not yet read it, and I am writing a review of Stiglitz’ Making Globalization Work. There are too many flaws to correct in one little review, but I will be looking to take on a number of key issues brought up. These are: patents, labor markets and wages and money (I will probably take on more than three, but these are the three I can think of right now). He pushes Keynes’ idea on the “bancor”.

Does anybody know the pages in Keynes’ work that are more pertinent to this idea? I want to read what Keynes has to say, before I quote Keynes by way of Stiglitz (who may have misquoted Keynes). Ultimately, I will critique Stiglitz on his lack of knowledge on capital theory and the effect of fiat money on the relative price of different capital.

2

Nevermind, apparently the Bancor was presented during Bretton Woods, not in his writings.

3

Yeah, I read General Theory and didn’t remember seeing anything about it, so I did a search of pdf of the book for it and came up with nothing related to it.

4

There’s a Wiki about it.

5

Anybody know a reliable source for information on the bancor? I have to start writing the review. It has to be limited to six pages apparently (double spaced, but I’ll see if I can get away with single spaced) and so I think I will cover three main disagreements: global reserves, international wages and liberalization/nationalization. The bancor will be related to the global reserve topic (since he suggests following Keynes’ bancor idea).

6

Here’s something.

7

Thanks!

I decided to leave my points on international currency out of the review. My professor set up a page limit of six pages double-spaced, and she was gracious enough to revoke the requirement for double-spaced text and the six page limit for me, but I imagine that she meant that only as long as it was marginally over six pages. The way things are going, if I cover three separate issues the review will be over twelve pages long.

Nevertheless, all this research on the bancor has spurred interest and I think I will write something for my blog or something like and keep it on file just in case I can use it in the future.

8

Reading more and more on the bancor, the idea is really confusing. I’m still not even sure how it would work, even theoretically. This article has a good overview, but it still does not remain clear.

9

I must say thats hardly surprising …

10

Maybe the keynesians just misspelled Banker. Its wouldn’t be the biggest mistake they’ve ever made…

Le_Master 11
12

I posted Keynes article, The Objective of International Price Stability, on my blog. There are more in depth articles, but I figure it would be wise to understand what exactly Keynes means. There are a lot of points in the article which I don’t understand, because I don’t know the terminology. Any help would be great, thanks.

On another view, however, each national price-level is primarily determined by the relation of the national wage-level to the national efficiency; or, more generally, by the relation of money-costs to efficiency in terms of the national unit of currency. And if price-levels are determined by money-costs, it follows that whilst an ” appropriate ” quantity of money is a necessary condition of stable prices, it is not a sufficient condition. For prices can only be stabilised by first stabilising the relation of money-wages (and other costs) to efficiency.

What does he mean by national wage-level to national efficiency? Is he referring to some macroeconomic (when it should be a microeconomic concept) concept to the relationship between real wage rates and marginal revenue? He continues:

The second (and more modern) complaint against the gold standard is, therefore, that it attempts to confine the natural tendency of wages to rise beyond the limits set by the volume of money, but can only do so by the weapon of deliberately creating unemployment.

Is he condoning increases of nominal wage rates through inflation? It seems that he understands that to increase nominal wage rates artificially means to create unemployment, but I don’t understand how he sees merit through wage increases through inflation.

The primary aim of an international currency scheme should be, therefore, to prevent not only those evils which result from a chronic shortage of international money due to the draining of gold into creditor countries but also those which follow from countries failing to maintain stability of domestic efficiency-costs and moving out of step with one another in their national wage-policies without having at their disposal any means of orderly adjustment. And if orderly adjustment is allowed, that is another way of saying that countries may be allowed by the scheme, which is not the case with the gold standard, to pursue, if they choose, different wage policies and, therefore, different price policies

This is really ambigious, and I’m not sure I understand what he’s trying to say. He says that an international currency could basically provide liquidity to those countries where gold is leaving from, and those which have high artificial wage rates not matched by inflation (which means that he understands that high real wage rates can “set off” the business cycle [see: Vedder & Gallaway’s Out of Work]). What does he mean by orderly adjustment? Inflation?

Thanks.