World Bank reaffirms gold as "reference point" to monetary system reform

08:14, December 23, 2010      

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World Bank President Robert Zoellick reaffirmed his proposal to use gold as a "reference point" to reform the current international monetary system on Wednesday in Paris.

"What I suggested is that gold serves as a key reference point to allow people to assess the relations between different currencies," Zoellick told the press here at the end of his meeting with French President Nicolas Sarkozy in the Elysee Palace.

"It's an approach that we can take, others also estimate that we can establish a benchmark against prices of principal commodities," the World Bank president said in response to a journalist's question.

"I didn't propose a gold standard, which is an important distinction because it would directly link currency to gold," said Zoellick, denying reports that he had called for a return to the " gold standard" to modify the present monetary system, which he called "Bretton Woods II."

"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," Zoellick wrote in an article published in Monday's Financial Times.

Some media said Zoellick's proposal to revive gold's role in guiding exchange rates worked as a shock wave to current discussions and disputes over the international monetary system.

The "gold standard" is a system in which the standard economic unit of account is a fixed weight of gold.

Under the Bretton Woods system, which was set up in 1944 in the United States, the U.S. dollar was directly pegged to gold -- 35 dollars equaled per ounce -- while other currencies were pegged to the dollar. The Bretton Woods fixed exchange rate regime broke down in 1971, when the United States unilaterally terminated convertibility of the dollar to gold.

Source: Xinhua
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