In the last few years, we've seen the Euro -- which many people thought would be a disaster -- prove to be an extremely powerful currency and challenging the pre-eminence of the US dollar. The 18 countries officially in the Eurozone (15 EU states, plus three more that mint their own coins with permission) now have a collective strength bigger than the US economy in terms of GDP. The twelve countries which still haven't adopted the Euro are also doing relatively well right now -- and of those that have to join at some point (other than Denmark, Sweden and the UK which still have opt-outs) the delay is only because of short term spikes in food and energy costs.
Even the Bank of Canada now has more reserves in Euros than US dollars (really!) which indicates how much we think the States are going to hell in a hand basket. With the news this week that Canada will indeed open free trade talks with the EU later this year, as many on both the right as well as on the left (one of them like myself) have suggested, the US government as well as the American people are being put on notice.
The Euro wasn't the first common currency of course. There was a Latin Monetary Union in the 19th century; and several Caribbean states share their own dollar which generally floats with the American buck. Some South American countries' alliance in the Mercosur alliance may view a European-style union as the next logical step.
The idea of an "Amero" uniting the money Canada, the US and Mexico is just talk however; and suggested Amero coins are just that -- privately minted collector's items that are playing on people's fears, thankfully pundits like Lou Dobbs are being made to look like fools on this. (The good folks at Snopes.com thoroughly debunk the myth here as well as explaining the Euro's key weakness.)
Some other monetary unions are pending. However, one potential common currency that is not mere talk but the next shoe to drop is that which is now being discussed by the Gulf Cooperation Council, or GCC. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates and possibly Yemen (whose membership in the group is pending) are planning to roll out something temporarily called the khaleeji, as early as 2010. A new reserve currency is really going to cause problems for the West especially if it proves to be as resilient as the once weak Euro -- since pressures are going to be high to keep oil at least $100 pb for some time to come.
Yet there is no talk from the US candidates for President -- Sen. John McCain (R-AZ) or Sen. Barack Obama (D-IL) any more about this than about the dramatic rise in the Euro (which I talked about last month), which increased even more this week when the ECB raised interest rates in the Eurozone to control inflation. What are these candidates, chicken? People who trade in forex, including increasingly the common man, would like to know. As would the rest who wonder if they can even afford to take a vacation in their own country this year let alone go abroad.
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Indeed, why not consider what will be the endgame of the trend toward monetary union, and that endgame is a Single Global Currency.
Nobel Laureate Robert Mundell is known as one of the fathers of the euro and has long been a proponent of a Single Global Currency. His proposal to use China's excess reserves as a basis for a new international currency is creative.
The Single Global Currency Association promotes the implementation of a Single Global Currency, with a Global Central bank, by the year 2024. With the successful use of the euro and other common currencies, more and more people and organizations and nations are seeing the advantages of monetary unions. Our website is at www.singleglobalcurrency.org.
The Association recently published the 2008 Edition of my book, The Single Global Currency - Common Cents for the World. A copy of the 2007 edition is available at the Munchen personal archive at http://mpra.ub.uni-muenchen.de/5879/. and on the Association's website.
The goal of 2024 is only 16 years away. If one looks at the world before the 2002 distribution of the euro to the people of the EMU, you would have seen in 1986 a Europe with a Soviet Union, an East Germany and a Berlin Wall. At that time, most Europeans would have scoffed at the idea of a new monetary union.
The benefits of a Single Global Currency include:
- Zero transaction costs to exchange currencies. Presently, $3.2 trillion is traded every trading day and all this trading and its associated costs, approximately $400 billion annually, can be eliminated.
- The end of currency fluctuations and currency speculation.
- The end of "Balance of Payments", "Current Account" and "global imbalances" problems for currency areas. There will, of course, still be trade and wealth inequalities, and more visibly; but they will not be compounded by the problem of foreign exchange transactions and reserve requirements. There would be no need for countries to maintain international reserves of other currencies.
- Zero manipulation by countries of their currencies, and thus no more need to cajole and jawbone any particular country or currency area about the value of its currency.
- Zero risk of national and regional currency crises such as occurred in the 1990's in Mexico, Argentina, Malaysia, South Korea and Russia.
- Minimal inflation, assuming that the future global central bank sets and achieves a low inflation rate, just as the European Central Bank has done. It's not clear that a zero inflation rate can be secured, as that would bring an economy perilously close to deflation and a deflation spiral, but certainly a low rate of inflation would be better for the world than the current rates.
- Worldwide asset values will increase by about $36 trillion due to the elimination of currency risk. Such an increase in asset values will cause annual worldwide GDP to increase by about $9 trillion.
- With no currrency risk, worldwide interest rates would be lower.
- With zero risk of currency failure and zero manipulation and minimal inflation, the Single Global Currency would satisfy the moral obligation that a stable currency should be considered as a fundamental human right, as is the right to own property. A Single Global Currency would be far more stable than the currencies presently used by billions of human beings
While all these benefits are expected upon the implementation of a Single Global Currency, considerable benefits will also come during the implementation processes which will see the reduction of national currencies as predicted and welcomed recently by Benn Steil in Foreign Affairs.
Of course, not all economists agree with the goal of a single global currency. For those who would label the single global currency utopian, we call their attention to the euro, which began as a plan only about 30 years ago. Who would have thought in the 1970's that Europe would not only adopt a common currency, but also that its member countries would discard their old currencies?
The single global currency might be an enlarged transformation of one of the current major currencies (dollar, euro, yen), perhaps with a new name such as "dey", "eartha", "geo","globo" or "worldo" or it might be a new currency with such a name. How we get to that point is, of course, a major challenge, but there are several possible routes. One is to continue the trend of creating and expanding regional monetary unions, and then combine those monetary unions into one. Another is for smaller countries to continue to "ize" their nations' legal tender, as in "dollarize" and "euroize", as has been done in El Salvador and Monaco. Compatible with all these and other routes is the need to convene an international monetary conference of nations, monetary unions and related organizations, and begin planning for the implementation of a single global currency.
Organizations such as the IMF and the Bank for International Settlements, and individual economists should begin to carefully research and write about the benefits claimed above for the Single Global Currency, and about the costs, too. When the vast benefits become better known, the people of the world will demand a Single Global Currency and ask why we have been burdened so long with the existing multicurrency system, which Robert Mundell describes as "absurd."
Morrison Bonpasse
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