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Keynes Plan

The U.K. treasury submitted proposals for the establishment of an International Clearing Union for discussion at the Bretton Woods Conference in 1944. These proposals were primarily the work of J. M. Keynes, and became known as the Keynes Plan. The International Clearing Union would have basically the same functions as a domestic bank and clearing house. International debts would be cleared on a multilateral basis between its members. It would give oveerdraft facilities to a member running a temporary balance of payments deficit and would create its own unit of currency, called bancor, in which the overdraft facility would be made available. Bancor would have a gold exchange rate in the initial phases of the scheme, though it was expected that it would eventually break into gold connection and replace gold in international finance. Each member would have a quota which determined the limits of its credit facilities with the International Clearing Union. There was a set of suggested safeguards and penalties to encourage the elimination not only of deficits but also of persistent surpluses. The plan did not win approval at Bretton Woods and the less radical international monetary fund was established, which was more in line with the deas put forward by the U.S.

Reference: The Penguin Dictionary of Economics, 3rd edt.