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Nobel Prize Winner Proposes New Currency -- "intor"
An international currency, which can be called "intor," should be created in order to keep the stability of the international financial system, a Nobel Prize winner economist said in Shanghai Saturday.
The mainstream of the world economy is now dominated by the three largest currency areas, the dollar, euro and yen areas, which have become three "islands of stability" of the world's financial situation, said Robert Mundell, a Nobel Prize winner in economics in 1999.
In his written speech delivered at the CEO Summit of the Asia- Pacific Economic Cooperation (APEC), Mundell noted that "it is a much better situation that existed in the 1970s when the dollar was the sole large currency area and it had succumbed to inflationary tendencies."
"Nevertheless, it should not be thought that the present international monetary arrangements are close to optimal. The biggest threat to prosperity is the high degree of instability of the major exchange rates."
Mundell, a professor at the Columbia University in the United States, stressed that the instability of the yen-dollar and dollar- euro rates pose "a major problem" for the dollar, euro and yen areas and "at least great a problem for the rest of the world."
A G-3 monetary union, based on fixed rates between the dollar, euro and yen, could be used as a platform on which to build a much- needed world currency, Mundell said.
"The model would be the EMU (European Monetary Unit) as it now exists, before national currencies have been replaced," he said.
"Once that three-currency monetary union is brought into being, the Board of Governors of the International Monetary Fund (IMF) could establish an international currency -- call it the 'intor' -- equivalent to a unit of the three-currency union."
"Initially it would probably be best to make the intor equivalent to the dollar because the dollar is the most widely- used international unit of account," Mundell added.
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