The head of the World Bank has reignited the debate over the future of the global monetary system by urging world leaders to consider reintroducing a gold standard to guide currency movements.

Robert Zoellick, president of the World Bank, said today that the world's largest economies should build a more co-operative monetary system. This would increase investor confidence and stimulate future economic growth, he argued.

"This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi [yuan] that moves towards internationalisation," said Zoellick in an article published in the Financial Times. "The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values."

Zoellick's comments came just three days before world leaders gather in Korea for the G20 summit, where the US Federal Reserve's decision to embark on a fresh $600bn (£370m) fiscal stimulus is expected to be widely criticised.

It is nearly 40 years since President Nixon abruptly terminated the link between the dollar and gold. This decision ended the Bretton Woods system, under which leading economies agreed to keep their currencies pegged to the dollar at fixed, but adjustable, rates. Zoellick acknowledged that returning to a gold standard might seem anachronistic, but argued that it was already being used as an "alternative monetary asset" today.

Zoellick also believes that the leaders of the G7 should agree new measures to help developing nations grow their own economies, as well as pledging not to manipulate their own currencies apart from in exceptional circumstances.

Gold has more than doubled in value since the summer of 2007, when the financial markets were hit by the credit crunch. It remained in demand this morning, hitting a new all-time high of $1,399 an ounce.

Critics of the gold standard, though, argue that fixed exchange rates resulted in higher unemployment and slower economic growth during previous economic crises, as countries lacked the ability to stimulate their economies through devaluation.

James Bradford DeLong, professor of economics at UC Berkeley, argued it would be foolish to peg world currencies to an asset that they cannot control, adding that Zoellick "really may be the stupidest man alive".

Nouriel Roubini, professor of economics at New York University's Stern School of Business, said that a return to fixed global interest rates would be "both undesirable and a pipe dream".

Protectionism fears

The US Federal Reserve has come under growing pressure since announcing a fresh $600bn quantitative easing programme last week. Germany's finance minister, Wolfgang Schäuble, attacked the move today, saying it would destabilise the global economy. He argues that the US is using "QE2" to temporarily devalue the dollar.

"I seriously doubt that it makes sense to pump unlimited amounts of money into the markets. There is no lack of liquidity in the US economy, which is why I don't recognise the economic argument behind this measure," Schäuble told the German magazine Der Spiegel.

"It's inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money," Schäuble added.

President Barack Obama defended the Fed's move, telling a press conference in India today that QE2 could be "good for the world as a whole".

"We can't continue in a situation in which some countries are maintaining massive surpluses and other countries are maintaining massive deficits," Obama said.

US politicians have become increasingly concerned that the Chinese government is deliberately maintaining its currency, the yuan, at too low a level – helping its exporters but making it harder for US companies to sell goods to China. This claim has been rejected by Beijing, though, with the Chinese premier, Wen Jiabao, warning last month of widespread suffering and social unrest if the yuan suddenly jumped in value.

Some analysts fear that the G20 meeting could lead to escalating tensions between the world's largest economies.

Wing Sze Liu, research analyst at Cantor Fitzgerald, said: "If no agreements are achieved, we can look forward to intensification of capital controls, currency market intervention, and protectionist measures in general."

Japan has also added to concerns that an international currency war is brewing. Last month it left interest rates at between zero and 0.1%, and has also intervened to try to weaken the yen against the dollar.