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Could a single global currency work?
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Results so far:
| Yes | 45% | 263 votes | Total: 589 votes | |
| No | 55% | 326 votes |
Yes
by Michael Greaney
Created on: February 28, 2008
The idea of a single global currency is not only feasible in our day and age, it has been effectively implemented a number of times in the past. Any numismatist - "coin collector" - can rattle off examples of currencies that functioned as global media of exchange without batting an eye.
The Athenian "owls" (Drachma) either circulated as currency or trade items throughout the ancient world, reaching as far as India, and serving as a standard of value in the civilized (i.e., Greek) world. The Tetradrachms (Four Drachma pieces) of Alexander the Great circulated everywhere with the same design for centuries after the conquerer's brief career. The Roman Denarius was the standard and model of Europe's monetary system after the reforms of Pepin and Charlemagne until the last vestige was abolished in 1970 with England's decimalization - and even then retained the old name of "pound," derived from a Roman pound of silver, divided into 240 "pennyweights." The Spanish "Piece of Eight" (8 Reales of 12-1/2 cents) was found everywhere, and was the basis for the "quasi-decimal" system of the United States. The British Sovereign of .2354 ounces of gold served as a global currency until c. 1927, when it was largely replaced by the United States dollar.
The problem is obviously not whether a single global currency could work. It already has, to all intents and purposes. The question is whether a global currency could be managed properly, without any one country or group of countries having the power or ability to manipulate things to its or their advantage and the disadvantage of others. The Prussian National Bank, which managed to seize near-total control of the finances of the Holy Roman Empire and the Confederation of the Rhine after the decline of Austria and the establishment of the Zollverein provided Bismarck with a powerful and effective means of achieving his goal of Prussian domination of a unified Germany under the Second Reich. Bismarck's manipulation of the attempts to achieve a uniform currency throughout all the Germanies meant that Prussian militarism, instead of Bavarian federalism or Austrian imperialism would set the tone for the unification of Germany, and prepare the stage for Hitler.
A uniform global currency can be a valuable tool in countering the ill effects of globalization, just as it can be used to allow a small elite or a single country to dominate others. To ensure that a global currency works properly for the benefit of all the people in the world, not just a select few, some reforms in international as well as national banking and finance are essential:
1. It is not necessary to establish a single central bank for the world. It may, in fact, be a bad idea - a monopoly on anything is rarely good. Instead, using the model provided by the central bank of the United States, the Federal Reserve System, a "regional" central bank or banks can be established for each country. All currency issued by all the regional central banks - while legally an obligation of that bank alone - would have to pass "at par" with the currencies of all other central banks, and pass everywhere without the imposition of exchange charges, surcharges, or tariffs. The United States, contrary to popular belief, does not have one uniform currency, it has thirteen separate currencies, all of which pass at par with the others. These are the issues of the twelve Federal Reserve Districts, and a special issue, discernible by red serial numbers and seals, called "United States Notes" that are required by law to be maintained in circulation, and are nominally backed by gold ... which you cannot obtain in exchange for the notes, which pass as ordinary Federal Reserve Notes, regardless what it says on the note!
2. Governments must be prohibited from being able to have their debt instruments purchased by any central bank with money created for the purpose. This allows them to circumvent the appropriations process and removes the accountability to the public inherent in any tax. This is, admittedly, the way that most currency gets into circulation these days, but it is directly contrary to the stated purpose of most central banks, even illegal - which doesn't stop governments from getting around the law. The Federal Reserve, for example, is legally prohibited from purchasing debt paper directly from the government. In order to be able to affect reserve requirements of commercial banks, however (which are legally required to hold their reserves only in the form of cash or government bonds), the Federal Reserve has to be allowed to purchase "secondary" government issues on the "open market." This means that, while the Federal Reserve cannot purchase bonds directly from the government, it can purchase bonds from traders who hold them for a microsecond or so, turning the prohibited "primary" issues into legal "secondary" issues. Most central banks manage to skirt the intent of their enabling laws in similar ways.
3. All currency and demand deposits created must only be created to purchase financially feasible loans made by commercial banks to form private sector capital, not fund government or consumer expenditures. If the commercial banks were to institute a 100% reserve requirement (similar to the "Chicago Plan" proposed in the 1930s), there would be no danger of the "multiplier effect" being manipulated by commercial banks or governments to create unbacked currency to compete with the currency or demand deposits backed by private sector assets instead of government debt.
4. All new capital formation (that is, all new capital formed in excess of what is needed to replace existing assets as they wear out) must be financed in ways that create new owners, not concentrate ownership of the new capital in the hands of the currently wealthy. This will increase incomes across the board without taking anything away from the currently wealthy, who can be left secure in their existing accumulations.
These principles - and others, derived from them intended to support their implementation and maintenance - are necessary to the economic and political feasibility of any single global currency. Without these essential principles being embodied in the operation of the commercial and central banking systems of the world, it will be possible to manipulate any global currency for the benefit or advantage of a few, instead of using the uniquely social good of money and credit for the good of everyone in the world. As Henry C. Adams noted in 1898, manipulation of money and credit through unwise government spending or borrowing is the surest way to undermine and finally destroy the sovereignty of nations. Run in a manner consistent with the above principles, a global currency would enhance national and, especially, individual sovereignty. Managed in a way that simply continues current central bank policies and financing techniques, the result of a global currency would be oppression and tyranny.
Learn more about this author, Michael Greaney.
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No
by Ray Burke
Created on: October 13, 2008
Do we need a single global currency?
I think it was Margaret Thatcher who said we already have a single global currency it's called the US dollar. That was in relation to the impending Euro. Not that the dollar is performing at its best at the moment, but it does get around, albeit it in tandem with other local currencies. And there's the rub; a single global currency sounds good and may make sense, but after investigating both sides of the issue, I don't think it will work for several reasons.
The Pros:
A single global currency would get rid of exchange rates and a myriad of other languishing currencies, thereby making financial trading easier and less perilous in less secure times. There'd be no more news reports of dollars to sterling; yen to euros; or roubles to rupees. This would also get rid of a whole industry of money changers and dealers, possibly leading to a more streamlined and manageable banking system. That could be a good thing. Would that have made this financial crisis better to deal with, with no foreign exchange rates and foreign money devaluations to live through? A single global currency couldn't be devalued against another country's making any funding more accessible.
Many countries around the world have updated their currencies with a few minor disruptions (e.g. Britain's shillings to sterling, Continental Europe's conversion to Euros), so adopting a single global currency maybe one continent at a time may help ease any disruptions.
Having a single currency would benefit financial security as black markets of alternative currencies would cease. Since everyone would own and know what a legitimate bill/coin looked like, it would be far easier to spot a fake. Better re-use and recycling of bills and coins would also be a benefit of a single currency. The costs in savings from not having to set up language translations of various currencies in shops, travel agents, banks, and on signs, would also be an advantage. Advertising, marketing and promotion could be targeted more affectively for one currency rather than several. A single currency would save money in bureaucracy.
Having a single currency would make it easier to have a cashless system. Paying by a credit system, chip and pin card, mobile phone, etc would be easier when spending or sending money around the world with no exchange commission or charges applied.
In an age of globalisation, a single global currency would add to the already growing arena of the global village. Weaker nations would feel akin to larger nations, sharing in the same currency of wealth, while confident in the knowledge that their smaller economies wouldn't be swamped with foreign investment currencies. A single currency would bring the world together, perhaps acting as a precursor to joined-up world governance; one currency, one voice, one world.
Or is that the case?
The Cons:
As was seen in the run up to the introduction to the Euro, the monopoly-like money of the European continent, countries hated the fact that they were giving up centuries-old currencies. There is still opposition to it. People believed that they were giving up their independence, identity, and sovereignty to the European Union, whose parliament is made up of faceless bureaucrats, to most Europeans. The fate of one's own economic policy would lie away from their native countries. Luckily Britain has so far declined to join and has survived well without it, proving that a joined-up currency policy is not needed to prosper.
Not all nations are equal in their economies. Continent-wide single currencies may the precursor to a single global currency, but the third world countries and other weaker nations would have to come up to a certain economic standard, before a strong global currency overwhelmed their system. Even throughout Europe, the Euro is worth different values between the more prosperous west than in the east. Products and labour have differing values; prices will change in accordance to more local conditions, so there would still be some kind of discrepancies and exchange' rates from country to country. How could this be controlled?
How would institutions like the IMF and World Bank fare in this currency transition? A new global financial institution would have to be created, along with more bureaucracy and administration. The location of any central currency administration may be disputed so not to imply that a powerful nation controlled all of the world's money. Surely some of the multinationals would lose several divisions and others become defunct? Far from being streamlined, the banking system would be gutted, leaving thousands unemployed with lost revenue and taxes from foreign exchanges.
A single global currency would instigate globalisation, trade imbalances, and elimination of competition. It is also classic putting your eggs in one basket; a financial no-no. There would be no fall back just in case. Globalisation through a global currency would seem very Big Brother like. No world government plan has succeeded (League of Nations, -even the UN is a mess), a world language has failed (Esperanto); in fact there is no world spanning system that has succeeded or does not have some sort of tandem or back up system. A global currency would be a footnote with the League of Nations and Esperanto.
Lesser problems would include negotiations over what symbols to put on the currency and what denominations to have, what to call it, and who would have authority over printing and minting. Symbols on the bills and coins, would probably be neutral to avoid any accusations of bias over ownership and sovereignty. Even the currency's name would have to be neutral to avoid the same issues.
The myth of money and alternative currencies:
The myth of money lies in the fact that we give some intrinsic worth to bits of paper and metal. Anything could be used as money, but currencies are perceived at being at that value because a central power tells us what it is worth. Not all cultures believe in hard currency and its power, thus unequal dominance would reign with larger countries and multinationals controlling weaker economies. Some countries, either because of ideological, religious, or cultural beliefs would not want to share a currency with another nation or their enemy or submit to what in effect could turn out to be neo-economic-colonia lism. Because of the nature of free market economies and more socialist states, a single currency would end up in the hands of the marketers.
Alternativ es to money would not also work. The Gold Standard is not the same as a single currency as the general population at large doesn't use gold. It was the preserve of the government and elite. Diamonds, like any other mineral/element, would necessarily lead to environmental degradation as miners sought evermore declining resources in sensitive areas. Plus with the general population walking around with pockets and pouches full of gold or diamond bits and dust, crime rates would soar, destabilising the market. A cashless system could also rival bills and coins, negating the need for a single currency.
Some people say that in the past, the Romans and other conquering empires established single global' currencies, but really there were other local currencies and trading systems in effect, as seem in archaeological investigations. There has never been a true global currency and there never will be. No other single global system has worked. Mankind is and always will be an individualistic-incl ined and protectionist being and the temptation to impose any single global system upon him will be doomed to fail, as two World Wars have found. A single global currency would lead to a world of less choice, less character, and less freedom.
Learn more about this author, Ray Burke.
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