World Bank president Robert Zoellick has called on bickering G20 nations to bring gold back into the global monetary system as an anchor to guide currency movements.
Ahead of a G20 summit this week in Seoul, Zoellick said an updated gold standard could help retool the world economy at a time of serious tensions over currencies and US monetary policy.
He said the world needed a new regime to succeed the “Bretton Woods II” system of floating currencies, which has been in place since the fixed-rate currency system linked to gold broke down in 1971.
The new system “is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi [yuan] that moves towards internationalisation and then an open capital account,” he wrote in the Financial Times yesterday.
“The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values,” Zoellick said in a commentary piece.
“Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,” he wrote.
The original Bretton Woods agreement laid out a US-led framework for stability in the world financial system after World War II, with the dollar pegged to gold and controls in place to limit the flow of capital.
The gold standard is believed to help guard against inflation, but does not allow for the flexible monetary policy that many economists believe is essential in counteracting economic shocks.
It was abandoned by US president Richard Nixon in 1971 as the dollar’s value plummeted relative to gold. Today, gold prices are again riding as investors seek a timeless hedge against the risks of inflation and US indebtedness.
Zoellick acknowledged that forging a new monetary agreement to govern the world economy would take time, two years after the West’s worst financial crisis since the 1930s.
“But we need to begin,” he wrote.
The World Bank chief’s comments came amid worries of a new “currency war,” when countries jostle for trade advantage by massaging their exchange rates lower.
The US has led accusations that China cheats in world trade by artificially weakening its currency.
However, Washington also stands accused of tolerating a weak dollar, roiling emerging markets whose own currencies are rising strongly, hurting their export competitiveness. The complaints have intensified since the US Federal Reserve last week announced a US$600 billion shot of monetary stimulus — in effect printing money that other economies worry will flood their markets.
Zoellick also called on the G20, whose leaders meet in the South Korean capital on Thursday and Friday, to forge structural reforms, including more domestic demand in China and more debt-reduction in the US.
Major economies “should agree to forgo currency intervention, except in rare circumstances agreed to by others,” he added.
The G20 could work out tools to help emerging economies cope with the kinds of hot-money flows that are now driving up their currencies and creating fears of asset bubbles.
The G20 should also “support growth by focusing on supply-side bottlenecks in developing countries,” such as infrastructure, agriculture and a lack of skilled labor, Zoellick said.
“Perhaps most importantly, this package could get governments ahead of problems instead of reacting to economic, political and social storms,” the World Bank president said.
He said the G20 faced a choice between “drive or drift.”
“How the G20 decides could determine whether multilateral cooperation can achieve a strong economic recovery,” Zoellick said.
See Britain’s on page 9
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”