A World Currency
Inspired by the article published by The Economist on Jan. 9th, 1988 (See below for reference)
As we can see, using national currencies poses some problems, such as the exchange rates on money exchange or money transfer abroad. So, there is no way to duck this question; why not have an ideal world economy, where there is only one supranational currency to manage all the transactions; instead of numerous national currencies?
Having one world currency seems unavoidable and worth considering. Perhaps sooner or later, all the people in the world, in rich countries or maybe some poor ones, will be using the same currency to trade or purchase the items they need. There will probably not be any of the national fiat currencies in different countries; instead, there will be only a single currency that is way more convenient to use than national currencies.
Why a world currency?
In the early 1970s, the most significant change in the economy happened when trading goods were replaced by money, and it is now handling and directing the exchange rates. Over the past decades, there were some attempts to solve the exchange rate problems. More than thirty years ago, the governments wanted to adjust the exchange rates system to have a more controlled one.
However, they did not think of the underlying economic policies. There was no policy co-operation, that is why the Black Monday stock market happened in October 1987. The Black Monday stock market crash had a devastating impact on the financial world by increasing interest rates. This stock crash is known as the biggest single-day market downturn in history.
After this massive stock crash, the exchange-rate reformers recognized that without any policy co-operation, the plan of securing currencies is not possible. For making this happen, governments must surrender some of their economic sovereignty.
Nowadays, despite the discrepancies in national economic policies, cross-border transactions are yet still happening. This is due to the world’s financial markets integration.
But, what is the problem of cross-border transfers?
These transactions can influence exchange rates indirectly. Because they can alter the trade revenues and different currencies' demand and supply, and as a result, stability of exchange rates. Besides, telecommunications improvements help to make these transfers even faster and less expensive over time. All these together produce huge volatility in national currencies along with breaking down the national economic boundaries.
In this way, the necessity of forming a single currency across all countries in the world becomes more plausible. By creating a universal currency, all the economic problems will be resolved and adjusted automatically. There will be no currency risks. Instead, there will be significant improvements in employment, investment, and trade.
Probably there would be a central bank, descended from The International Monetary Fund (IMF), for supplying this global currency. Also, national monetary policy or numerous national government-related rules will be abolished. As a result, the inflation rate in each country would be resolved or at least minimized. As there would be a worldwide central bank, countries cannot print money to finance their budget deficit; alternatively, they can borrow money from the central bank. In this way, governments will lose their economic sovereignty in any case. This is what makes this international currency more appealing.
So, as we can see, this economic union is literally irresistible, and governments can either accept it and follow this trend or find a way to bypass it. But, the question is, how can this integration be achieved? The most fundamental element is real policy agreements.
The governments have to let the international money be used alongside mainstream national currencies so that people could themselves choose moving forward to a single universal currency. But is there any alternative? There is one option, and that would be increasing certain restrictions and controls on trade and capital flows to protect policymaking independence. In that manner, governments have enough time to control the variations of exchange-rate, deploy financial policies without any interference, and overcome the inflation sudden jumps.
This world currency can have goods for everyone. By creating this global currency, there would be no currency risk in international trades and no fear of currency fluctuations for cross-border traders. It can eliminate the international transaction fees. Therefore, this plan of a world currency is worth contemplating and implementing. Nowadays, cryptocurrencies are literally making this possible by presenting themselves as a secure, easy, and quick mode of financial transactions. Finally, the concept of global currency is inevitable; therefore, it is better to embrace it with an open arm and appreciate the convenience.
Reference: The Economist