Bretton Woods Monetary Institute & Festival
“The aim of the Bretton Woods Conference was the creation of a dynamic world community
in which the peoples of every nation will be able to realize their potentialities in peace.”
Henry Morgenthau, Chairman 1944 Bretton Woods Conference & United States Secretary of the Treasury.
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Public Regulations
A New International Monetary System…
The task here is to rebalance trade and create an International Wealth Fund to fund programs to alleviate poverty, develop human capital, support marginalized communities and invest in the Green Transition across the world, and not just in the developing world but also in the rustbelts of the United States and Europe.
While keeping their own currencies, and central banks, members of the New Bretton Woods would agree to denominate all payments in a common accounting unit, let’s call it the Kosmos (K) – a common digital currency to be issued and regulated by the IMF on the basis of a transparent digital distributed ledger and an algorithm that would adjust the Ks total supply in a pre-agreed manner to the volume of world trade, all of which will be denominated in K units. Foreign exchange markets would function as they do now and the exchange rate between K and various currencies would vary in the same way that the IMF’s Special Drawing Rights do viz. the dollar, the euro, the yen etc. The difference, of course, would be that, under this system, member-states would allow all payments to each other to pass through their central bank’s K-account. Further, to exploit the system’s full potential for keeping imbalances under check, two stabilising transfers would be introduced.
The supply of K will be run on the basis of simple, automated rules which boost global K supply at times of a global slowdown, minimize politicians’ and bureaucrats’ discretionary power, regulate heavily the financial sector’s dealing in Ks and keep global trade and capital imbalances in check using two instruments:
The Levy: A trade imbalance levy to be charged annually to each central bank’s K-account in proportion to its current account deficit or surplus and paid into a common Wealth Fund
The Charge: Private financial institutions to pay a ‘surge’ fee into the same Fund in proportion to any surge of capital flows out of a country, reminiscent of the congestion price-hike that companies like Uber charge their customers at times of peak traffic
The Levy’s rationale is to motivate governments of surplus countries to boost domestic spending and investment while systematically reducing the international spending power of deficit countries. Foreign exchange markets will factor this in, adjusting exchange rates faster in response to current account imbalances and cancelling out much of the capital flows which today support chronically unbalanced trade. As for the Charge, it will automatically penalize speculative herd-like capital inflows or outflows without, however, handing discretionary power to bureaucrats or introducing inflexible capital controls.
Suddenly, through the Common Fund, the world will have acquired, without the need for any subscribed capital, a Global Sovereign Wealth Fund by which to fund programs to alleviate poverty, develop human capital, support marginalised communities and invest in the Green Transition across the world, and not just in the developing world but also in the deprived areas of United States and Europe.