Evening star., 1943-04-07
White Paper by
Lord Keynes Tells
Of Clearing Union

LORD keynes IeIls
Of Clearing Union
Continued From First Page)
mechanism an international clearing
union, from which countries in
temporary need of funds to finance
international trade would borrow,
and in which countries with favor
able balance Of payments would ac-
cumulate credits.
The plan places responsibilities on
both creditor and debtor countries
to work toward balancing of the
world economy.
World Banking Facilities.
Lord Keynes describes his pro-
posal as providing the same facilities
between nations that a banking sys-
tenn provides within nations. He
writes:
mo depositor in a local bank
suffers because the balances, which
he leaves idle, are employed to
finance the business of some one
else.
"Just as the development of ma
tional banking systems served to
offset deflationist pressure which
would have prevented otherwise the
development of modern industry, so
by extending the same principle into
the international field we may hope
to offset the contractionist pressure
which might otherwise overwhelm in
social disorder and disappointments
the good hopes of our modern world"
Lord Keynes plan makes no fixed
proposal for the amount of gold or
capital which the union would have.
while the United States Treasury
proposes $5,0O0,OO0
Would Fix Borrowing Quotas.
He suggests each United Nation be
given fixed quotas as to the amount
OF borrowing which they may do,
based on their average trade bal
ances over a period of time, and
rather flexible quotas as to the
amount Of credit they may accumu-
late.
He proposes transactions between
the nations operating in the union
be in terms of a new currency to be
called "bancor." its value fixed "but
not unalterably So in terms of gold,
and accepted as the equivalent of
gold. Local currencies would be sJa-
blllzed as to rates. which may be ad-
justed through certain procedures, in
terms OF bancor. The dealings
through the union would supplement
and balance dealings directly be-
tween countries, but not replace
them.
The United States proposal, giving
apparently considerable more prom
inence to gold, would make the clear
ing currency unit to be called uni
tas, equaFto 10 gold dollars.
The proposals diverge sharply on
representation as to the governing
board. The United States Treasury
suggests a plan under which the
United States would have at least
Is per cent of the voting power, and
an effective veto on important deci-
sions, because they would require an
80 per cent vote.
PrOp0rtionate Representation.
Lord Keynes, while proposing rep
resentation on the board in proper
ton to quotas, says:
Management of the institution
must be genuinely international,
without preponderant power of veto
or enforcement lying with any
country or group. And the rights
and privileges of smaller countries
must be safeguarded."
Some British sources felt the
American plan placed too great an
emphasis on gold, the Financial
Times commenting:
1T Is essential that gold should
not remain, as before the war, the
one and only import freely ac-
cepted by the United States econ
omy."
Gold holdings of the United
States Treasury now exceed
$22,0OO,O 100000, in addition to
which there are only about So
00o,000,000 of officially reported
monetary gold stocks in the
world. and nearly a third of that
held in the United States under
earmark for foreign account.)
Lord Keynes, in describing the
position Of gold in his plan, says:
Gold still possesses great psyche
logical value which is not being di-
minished by current events; and the
desire to possess gold reserve
against unforeseen contingencies is
likely to remain.
Useful Role for Gold.
Moreover, by supplying an auto
matte means for settling some part
OF the favorable balances of the
creditor countries, the current gold
production of the world and the
remnant of gold reserves held out
side the United States may still have
a useful part to play.
Nor Is it reasonable to ask the
United States to de-monetize the
stock of gold which is the basis of
its impregnable liquidity.
What in the long run the world
may decide to do with gold is
another matter. The purpose of
the clearing union is to supplant
gold as a governing factor, but not
to dispense with it."
He proposes that central banks of
various countries still have power to
ship gold to one another, but that
they not have power to bid higher
price for 1t than the union offers in
terms of bancor.
He also says there should be the
limitation that no power be per-
mitted to demand gold from the
union in terms of bancor, for bancor
would be available only for trans
ferring funds between accounts in
the union. If the union had too
much gold, he said, it might be pro-
vided that it could distribute it
among credit balances