Russia Backs Return To Gold Standard To Solve Financial
Crisis
International News Updates
01 April 2009
Russia has become the first major
country to call for a partial restoration of the Gold
Standard to uphold discipline in the world financial
system.
Arkady Dvorkevich, the Kremlin's chief economic
adviser, said Russia would favour the inclusion of
gold bullion in the basket-weighting of a new world
currency based on Special Drawing Rights issued by the
International Monetary Fund.
Chinese and Russian leaders both plan to open debate
on an SDR-based reserve currency as an alternative to
the US dollar at the G20 summit in London this week,
although the world may not yet be ready for such a
radical proposal.
Mr Dvorkevich said it was "logical" that the new
currency should include the rouble and the yuan,
adding that "we could also think about more effective
use of gold in this system".
The Gold Standard was the anchor of world finance in
the 19th Century but began breaking down during the
First World War as governments engaged in
unprecedented spending. It collapsed in the 1930s when
the British Empire, the US, and France all abandoned
their parities.
It was revived as part of fixed dollar system until US
inflation caused by the Vietnam War and "Great
Society" social spending forced President Richard
Nixon to close the gold window in 1971.
The world's fiat paper currencies have lacked any
external anchor ever since. It is widely argued that
the financial excesses and extreme debt leverage of
the last quarter century would have been impossible -
or less likely - under the discipline of gold.
Russia is a major gold producer with large untapped
reserves of ore so it has a clear interest in
promoting the idea. The Kremlin has already instructed
the central bank of gradually raise the gold share of
foreign reserves to 10pc.
China's government has floated a variant of this idea,
suggesting a currency based on 30 commodities along
the lines of the "Bancor" proposed by John Maynard
Keynes in 1944.
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