Bancor: the road not taken

When the world’s finance ministers gathered at Bretton Woods in 1944 to design the money order for the post-war world, there were two plans on the table. One put the US dollar at the centre of everything. The other refused to put any nation’s currency at the centre at all. The dollar won — but it’s worth knowing what we didn’t choose.

Keynes’s idea

John Maynard Keynes proposed a neutral international money he called the bancor. No single country would issue it or control it. Trade between nations would be settled in bancor through a global clearing union — and, crucially, the system nudged both big debtors and big surplus nations to rebalance, so no one country could run permanent deficits or permanently hoard the world’s demand. It was an attempt at money for the whole world that belonged to none of it.

Why the US said no

The United States emerged from the war holding roughly two-thirds of the world’s gold and producing much of its goods. A dollar-centred system handed America an enormous and permanent advantage: the power to issue the money the whole world would use. Why share that with a neutral unit no one controlled? The US had the leverage, and it used it. The dollar became the world’s reserve currency, redeemable for gold, and every other currency pegged itself to the dollar.

The catch they waved away

Keynes’s design was built to prevent exactly the imbalance that would later destroy Bretton Woods — a reserve issuer forced to flood the world with its own currency. By choosing a national money over a neutral one, the system baked in a contradiction it could not survive. Keynes, many argue, saw the whole thing coming from the start.

The bancor never happened — but the idea keeps returning. Every time people ask for money that no single government controls, they’re asking Keynes’s question again. Bitcoin is, in a sense, the bancor the cypherpunks simply built without asking permission: a neutral, global settlement money that belongs to no state.

So what exactly was the contradiction the dollar system couldn’t survive? An economist named Robert Triffin spelled it out — and it has haunted the dollar ever since. Next.

Key takeaways

At Bretton Woods, Keynes proposed ‘bancor’ — a neutral international money controlled by no single nation.
The US, holding most of the world’s gold, rejected it in favour of a dollar-centred system.

Check yourself

What was the bancor?

Why did the US reject the bancor?

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