With fears of a repetition of the 1930s slump receding, G20 leaders meeting in Pittsburgh this week can look confidently to the future. The largest co-ordinated monetary and fiscal intervention ever attempted has worked. International trade and the global economy will grow in 2010. History’s shortest “Great Depression” is almost over.

The Pittsburgh gathering will focus on how to prevent a recurrence. There are two big topics: the role of the International Monetary Fund (IMF) and the future of the banking industry.

The fund’s standing has been enhanced by the allocation during the summer of more than $280bn worth of special drawing rights (SDRs), the virtual reserve currency it issues. This increased the outstanding SDR stock by 850 per cent. The IMF is also playing a key part in devising finance sector reforms to be submitted to the Pittsburgh meeting by the Financial Stability Board (FSB), a new body created by the G20 in April.

The FSB wants capital increases and more regulation, including that of bank bonuses. But radical proposals have been rejected. They include greater state control of banking and Nobel Prize winner Robert Mundell’s call for a global currency. The scene is consequently being set for the next financial bubble and crash. Alan Greenspan, US Federal Reserve chairman for almost 19 years to January 2006, is explaining his role in the last one by saying it was the result of human behaviour that cannot be controlled. The implication is that another is bound to occur.

But monetary theory suggests there might be a better way. As every first-year economics undergraduate knows, money serves three functions: it is a unit of account, a medium of exchange and a store of value. The last two are the most critical.

Money as a medium of exchange supports economic activity. It is a process that facilitates value creation. Money as a store of value, in contrast, expresses a relationship. It defines a claim on property.

Banking, the industry most heavily engaged with money in all its forms, is consequently involved in processes and relationships. As recent experience has shown, this can create a conflict of interest. Banks managing their customers’ money are in the position to manage the payments systems they control in the pursuit of extra profit. Most companies and individuals use banks to make payments securely. The costs involved are minimal. Yet fees, and the time transfers take, are often incomprehensible.

There is talk of banning banks from simultaneously providing investment and commercial banking services. But a genuinely radical change would entail vertical disintegration to separate the financial payments infrastructure from financial service provision.

A similar approach might help at an international level. The credit crunch was not caused by a shortage of money as a store of value. The real economy may have been damaged, but aggregate financial wealth was largely preserved. In an effort to protect it, owners withdrew money from the banking system. What brought viable businesses down and the global economy to the verge of collapse was the consequent scarcity of money as a means of exchange. There needs to be two types of international money: one to facilitate payments and another to conserve wealth.

The big debate about the global financial system centres on the role of the dollar. But this issue cannot be addressed until there is an alternative to the US currency in the international payments system. That may be the SDR in due course.

Once that is in place, there is a simple way of deciding whether the dollar deserves to continue to be the principal vehicle most countries use to keep their wealth. If saving in the dollar works, then it will. If not, then the dollar should be rejected.

GCC states depend disproportionately on world trade and the international savings industry. They consequently have much to gain from action to bolster the international payments system and enhance the capacity of reserve currencies to conserve wealth.

GCC states have an abiding interest in a finance system that works and one that extends beyond the short-term horizons of most G-20 leaders. Saudi Arabia is the region’s sole representative at Pittsburgh. It has a special responsibility for maintaining the pressure for comprehensive finance industry reforms that may now be dissipating.