A global currrency

on Friday, 31 July 2009. Posted in World Government

Global currencyThe idea of a single global currency has been quietly batted around in banking and economist circles since the closing days of the Second World War. Over the years this call has increased in intensity. Consider some quotes:

1969: "Let me turn from digging away at the opposition to something more positive, and start with the best and worst of international monetary systems. The first-best, in my judgment, is a world money with a world monetary authority."— Charles P. Kindleberger, [Professor of Economics, MIT], speaking at a Federal Reserve Bank of Boston conference.

1984: "I have put forward a radical alternative scheme for the next century: the creation of a common currency for all the industrial democracies with a common monetary policy and a joint Bank of Issue to determine that monetary policy…This proposal is far too radical for the near future, but it could provide a ‘vision’ or goal which can guide interim steps..." — Richard N. Cooper [Harvard professor], speaking at a Federal Reserved Bank of Boston conference.

1998: "…the transition to a single currency for the entire world could come with a speed that might surprise many. The world might easily move from having almost 200 currencies today to having one within a decade, and twenty-five years from now, historians would wonder why it took so long to eliminate the Babel of currencies which existed in the twentieth century." — Bryan Taylor, Chief Economist at Global Financial Data.

2001: "When VISA was founded twenty-five years ago, the founders saw the world as needing a Single Global Currency for exchange. Everything we’ve done from a global perspective has been about trying to put one piece in place after another to fulfill that global vision." — Sarah Perry, Director of VISA’s Strategic Investment Program.

2004: "…if the global market economy is to thrive over the decades ahead, a global currency seems the logical concomitant." — Martin Wolf, chief economics commentator for the Financial Times, former senior economist at the World Bank.

In 2007, the Council on Foreign Relations propelled the idea of a planet-wide currency restructuring by publishing an article in it journal, Foreign Affairs, titled "The End of National Currency." [Note: on the cover of this Foreign Affairs issue, the article is titled "One World, Too Many Monies."]

Benn Steil, the Director of International Economics at the CFR, wrote that national money systems should be abandoned, "Since economic development outside the process of globalization is not longer possible…" Stated even more succinctly, "Monetary nationalism is simply incompatible with globalization." And, "In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies…"

Morrison Bonpasse, President of the Single Global Currency Association (SGCA), a group of economists working towards a world currency, answers that question, "The monetary unions of the twenty-first century, and those which survived the twentieth, are the milestones on the path to the future, and to the Global Monetary Union."

Bonpasse elaborates on this point further, "Thanks to the success of the European and other monetary unions, we now know how to create and maintain the 3-Gs: a Global Monetary Union, with a Global Central Bank and a Single Global Currency."

"The world is ready to begin preparing for a Single Global Currency, just as Europe prepared for the euro and as the Arabian Gulf countries are preparing for their common currency. After the goal of a Single Global Currency is established by countries representing a significant proportion of the world’s GDP, then the project can be pursued like its regional predecessors."

Simply put, the regional model becomes the steppingstone to a one-world currency. However, the problem of nationalism prevails. Discussing this "problem," Bonpasse writes, "The task can be stated quite simply: how to move from the current 147 currencies to 1. Developing the political will to overcome the residual strength of nationalism is the major challenge for the movement to a 3-G world. As with the implementation of the euro, the economics and politics of monetary union are inextricably bound together; and the logic of both point toward the 3-G world.

The question now is not whether the world will adopt a Single Global Currency but When? and How smooth, inexpensive, and planful OR rough, costly and chaotic will the journey be?" [Italics and capitals in original]

To the internationalist, national sovereignty is the overriding obstacle. In order for a Global Central Bank and world currency to exist, some other political arrangements will have to be formed. Robert Mundell understood this political problem when giving a lecture in 2003 titled, "The International Monetary System and the Case for a World Currency." His response was frank: "a global single currency could not be achieved without a global government. To enforce a single currency would involve big problems of organization."

But this reality isn’t stopping the SGCA and others of like mind from progressive planning. As Bonpasse asserts, "It is now time to seriously pursue the goal of a Single Global Currency as managed by a Global Central Bank within a Global Monetary Union."

Already the SGCA has a date in mind: 2024. Regarding a headquarters for the Global Central Bank, Bonpasse suggests Basel, Zurich, or Geneva. "Switzerland has a reputation for sound money, and locating the GCB in Switzerland just might be the necessary incentive for that country to join the Global Monetary Union as a member."

"The governing structure of the GCB should be relatively easy to design, given the available, successful models of the U.S. Federal Reserve, European Central Bank, International Monetary Fund, World Bank, United Nations, and associated organizations such as the World Health Organization. Not everyone is happy with the structure of all those organizations, but it’s a negotiable political question…"

He’s right: it is a political question. This was evident to Richard Cooper when he brought up the idea of a global central bank and currency while at a 1984 Federal Reserve conference in Bretton Woods, New Hampshire. "The idea is so far from being politically feasible at present – in its call for a real pooling of monetary sovereignty – that it will require many years of consideration before people become accustomed to the idea."

However, even then Cooper advanced a specific timetable to begin taking this idea seriously: "This one-currency regime is much too radical to envisage in the near future. But it is not too radical to envisage 25 years from now…"

In retrospect, Cooper’s timing appears fairly accurate: Twenty-five years after 1984 brings us to 2009, and today the idea of a single global currency is starting to gain traction through organizations like the SGCA and through major advocates such as Robert Mundell. Moreover, the Bank for International Settlements – which is viewed as the central bank for the world’s central bankers – has publicly considered the potential for a one-world currency built around regional groupings.

But will all of this "help the farmer in Africa," or bring wage equality to the worker’s of the world? Probably not: it will, however, give unprecedented powers to an international banking cartel, the likes of which has never been seen or experienced before. As a critic of global banking once wrote, "Money is money, and banking is banking, and neither recognizes any allegiances that don’t bear compound interest."

Carl Teichrib,
www.forcingchange.org

Printed with permission