The search for new reserve currencies: If Keynes were alive... There is a scent of gunpowder in the air, say no to war

Trump is determined to end the neoliberal order through customs tariffs. Confidence in the dollar is wavering. The dollar's status as a reserve currency is being debated. The possibility of China or BRICS countries creating a new reserve currency against the dollar is being discussed. 

It is useful to look at the search for new reserve currencies from the perspective of economic history. I wrote about this last week. The dollar's status as a reserve currency was established by the Bretton Woods Agreement in 1944, even before the Second World War had ended. Under this agreement, it was decided that the dollar would become the reserve currency and that the IMF and the World Bank would be established before the war concluded. This was followed by the founding of the UN and NATO. 

At the Bretton Woods conference, John Maynard Keynes, who attended on behalf of the United Kingdom, opposed the dollar becoming the reserve currency and instead proposed the creation of an international payment instrument called BANCOR as an international reserve currency.

Today, many economists point out that conditions are heading toward the pre-Bretton Woods era, and that conditions similar to those before the 1929 crisis could even emerge. Can China or the BRICS countries create a new reserve currency? That is another question. 

WORLD CRISES, WARS, AND RESERVE CURRENCY

Let me summarize the answer I have given to similar questions before, from a book I wrote.  (1)  

“The first major crisis capitalism entered is the one known as the Long Depression, which began on the Vienna Stock Exchange on May 9, 1873, and lasted for 23 years until it eased in 1896. It is among the causes of the First World War. The British Pound was the reserve currency. Let us also recall that after the war, because the UK was heavily indebted to the US, it abandoned the gold standard behind the Pound in 1931. 

The second major crisis is the Great Depression of 1929. After the First World War, capital and gold migrated to the US, and all asset prices formed a bubble. When the bubble burst in 1929, the crisis known as the Great Depression spread across the entire world. It is among the causes of the Second World War. With this war, the dollar became the world's new reserve currency. Behind it, just as in the early days of the pound sterling, there was gold. In 1971, the US abandoned the gold standard. Despite this, the dollar's status as a reserve currency still continues. 

THE BIG SURPRISE IN TRUMP'S SACK

Beyond customs tariffs, Trump has another big surprise in his sack. Along with customs tariffs, he wants to attract capital back to the US for production. But besides this, he had also made the following statement. Let us not forget, let us remember. 

“A gold card and citizenship for 5 million dollars... If we give a gold card to 10 million people in exchange for 5 million dollars, that makes 50 trillion dollars. This is even more than the 36 trillion dollars of US foreign debt...

For some reason, this statement reminded me of the migration of capital to the US after the First World War, the asset bubble in the US resulting from 40 percent of the world's gold reserves flowing into the country, and the Great Depression of 1929... Anyway, let us return to the crisis of our day.

HAS THE CRISIS THAT BEGAN IN 2008 ENDED? 

After recalling the two major crises above, let us continue from the book. 

“Neoliberalism entered a crisis in 2008. The reason was that the derivative securities issued by the financial system based on mortgage loans created a bubble in the markets. The impact of the crisis lasted from 2008 to 2016, and although it eased in 2016, its effects did not disappear. The Fed constantly printed money, and its balance sheet size grew from $900 billion to $4.5 trillion. While the Fed was aiming to withdraw $2 trillion from the market due to its bloated balance sheet, the Covid pandemic took hold of the world. The Fed and other central banks began printing money again, and the Fed's balance sheet size reached $9 trillion. A new bubble has formed in asset prices across all global markets, primarily in real estate.” 

We hope that the third major crisis capitalism has entered will conclude without leading to a major world war or catastrophe. But it seems that the formation of a new economic model and a new reserve currency will not happen without noise, commotion, or war.” (2)

IF KEYNES, WHO OPPOSED THE DOLLAR, WERE ALIVE TODAY

One must have the journalistic reflex of having dipped into economics... I think that in a period where uncertainty is increasing so much in the world and discussions about the search for a new reserve currency are taking place, it is necessary to add a bit of fantasy alongside reasonable discussions.

John Maynard Keynes, who opposed the dollar becoming the reserve currency at the Bretton Woods Conference and BANCOR proposed a reserve currency called  if he were alive, what would he propose today? I indulged in the fantasy of looking at today through Keynes's window.

 While discussing "new reserve currency formations, crypto assets, and what might happen tomorrow," I think it is useful to remember the BANCOR that Keynes proposed against the dollar at Bretton Woods. 

Keynes’s Bancor proposal aimed to use a global reserve currency to resolve payment imbalances in international trade and ensure the sustainability of the system. While allowing countries to maintain systems based on their own currencies, Bancor would have provided a form of oversight to balance trade surpluses and deficits between nations. Keynes’s goal was also to prevent excessive borrowing and exchange rate manipulation by countries.

Keynes’s Bancor proposal was not just a payment system, but also international cooperation and economic balance was a system that would ensure. Although the SDR used by the IMF today already functions somewhat like the Bancor, its use has not been as Keynes proposed and has remained quite limited. 

The Bancor aimed to prevent trade imbalances and balance of payments problems between countries. Today, a digital currency or the IMF's SDR (Special Drawing Right) could be considered as widely usable alternatives for such a system. In fact, one should think of the Bancor as a kind of SDR.

COULD DIGITAL CURRENCY BE KEYNES' MODERN BANCOR?

Digital currency, could potentially bring a more modern version of Keynes's Bancor proposal to life. But I must add this: I still cannot wrap my head around a crypto system like Bitcoin, where it is unclear who is behind it. I believe there must be an organization similar to the IMF, where international cooperation is guaranteed. If there is no international power similar to the IMF, and if the power behind the digital currency is to be China alone, we would simply be changing the name of the US dollar from the 1944 Bretton Woods Conference. And besides, this is not really possible right now without the transparency of the Chinese Yuan...To me, this seems like a solution without war, noise, or commotion. However, for such a structure to be successful, cooperation between countries, transparency, and an environment of peace must prevail. In a period where geopolitical tensions and threats of war are increasing so much, I think it seems a bit difficult to establish a reserve currency system based on international cooperation.

In summary, from a Keynesian perspective, the global economic structure and a new reserve currency require a peaceful environment.  

AND LET US REMEMBER CHINA'S RECENT MOVES 

So, can China create a reserve currency quietly? It is moving along this path silently and deeply.

We also do not talk much about the new payment systems developed by China. It is worth remembering.  The world is changing, and the financial architecture is shifting under our feet.

China's Cross-Border Interbank Payment System (CIPS): Established in 2015, it is a system that provides clearing and settlement services for cross-border Yuan payments. Created as an alternative to the SWIFT system, it had 168 direct and 1,461 indirect participants as of December 2024. 

Digital Yuan (e-CNY): A digital currency developed by the People's Bank of China... It aims to reduce costs and accelerate transactions in cross-border payments.

In recent years, an increase in the use of the Yuan for payments between Middle Eastern countries—such as Saudi Arabia, the United Arab Emirates, and Qatar—and China and Hong Kong has been observed. Most recently, just a month ago on March 17, 2025, it was announced that the People's Bank of China's digital RMB cross-border payment system would be fully connected to 10 Asian and 6 Middle Eastern countries. In the first test between Hong Kong and Abu Dhabi, it was announced that a company made a payment to a Middle Eastern supplier via digital RMB, and that this transaction was much faster and lower-cost than traditional methods.  It was stated that the transaction speed dropped to 7 seconds and costs were reduced by 98% compared to the US-controlled international payment system, SWIFT.

I have tried to summarize some minor details that should be taken into account in discussions regarding Trump's unpredictable behavior, the loss of the dollar's reputation, and the search for a new reserve digital currency. Of course, there will be discussions on many other topics. But looking through the window of economic history, I can summarize it as follows. 

The most important principle we should observe when discussing a new reserve currency should be this... Unfortunately, there is the smell of gunpowder in the air. Say No to War. 

 (1)(2) ( Turkey's Factory Settings for the Twenty-First Century / Counter-Revolution in the Economy / Meriç Köyatası Naviga Publications / amazon.com.tr/  and denizkutuphanesi.com)