Nearly every science fiction movie has them. Some futuristic currency used all over the world or galaxy; usually credits or “creds” for short. Imagine it; paying for a coffee in Japan, Brazil, Poland or the U.S. with the same money.
Seeing a world with a singular currency might at times be as far-fetched as all humanity speaking the same language, but it is possible, and many financial giants across the globe are calling for it. Not only that, but we have already seen the early stages of it. It seems to be a question not of if, but of when the world is united under a one currency system.
Futuristic, But Not a New Idea
It may seem like the realm of science fiction now, or even a legitimate theory of the 21st century, but the idea of a one currency system has been around much longer. The legendary economist John Maynard Keynes popularized the concept with a proposal all the way back in 1944.
He believed that there should be a global bank, called the International Clearing Union, that could issue its own currency called the “bancor.” This currency would be used between nations as a way of stabilizing international debts by making it easier and more worthwhile for creditor nations to spend their surpluses back into debtor nations.
The economies would revitalize, and it would help do away with nations paralyzed by debt and nations with surpluses dictating the flow of wealth. Inflation could also be better handled as the ICU could more easily control the world money rate.
Unfortunately for Keynes and perhaps the world economy, his ideas were rejected at large. But the idea didn’t die. It persisted throughout the decade, and at times seemed closer than many may have thought. In the 80s, The Economist magazine predicted we would all be spending the same currency worldwide right about, now, actually.
The idea has existed, in one form or the other, up until the present day. In 2009, China called on the IMF to create a currency similar in scope and principle to Keynes’ proposal. Since much of China’s wealth is locked up in dollars and not Chinese currency, their leaders were understandably shaken after the financial crisis of 2008.
They were afraid that their coffers would one day be stuffed with useless American dollars. A global currency would help ensure the stability of debt and prevent a cascade failure of both debtor and creditor. The West, however, was not on board and rejected the idea but China has yet to give up on it.
The Primordial Soup of Global Currency
Another pro one currency system argument is that it has already happened, albeit in smaller microcosms. The world has already experimented, either deliberately or inadvertently, with a global currency. These test runs and evolutionary ancestors to universal money will be remembered someday as the lower branches of the evolutionary tree of cash; the single-celled organisms in the primordial soup.
Global Currencies of the Past
The world has had its fair share of international currencies in the past. It used to be Spanish “pieces of eight,” spurred on by their global trade dominance. For a time it was the pound sterling, the currency of the British Empire that traversed the globe. One could even argue that gold was a kind of universal currency, as for over a century it was what backed most of the world’s currencies, and most money could be exchanged for the precious metal. Money has been trending toward unity and a one currency system for a long time.
The American Dollar
In many ways, we already have a sort of global currency. The U.S. dollar is the most widely accepted currency in the world at the moment. It can be used in many countries and is even legal tender and standard currency in some developing nations that needed a currency reset.
Oil prices the world over are calculated in dollars, and it is used as a metric to convert currencies. Despite the slowing of the American economy and a few recent bad years, the dollar still holds sway in many areas of the world. It is scratching the surface of what a global currency could achieve.
Perhaps the most striking example of what world money could be is the euro. It united almost an entire continent, legally and by design, under one universally accepted currency. The euro is not without its problems but it has remained stable over the years and has shown potential to overtake the dollar someday soon. The euro had and continues to have an overall positive result even though it was not universally accepted. Doubtless, when plans for the world currency are drafted, the euro will be scrutinized as a model.
The SDR: Global Money in Practice
Special Drawing Rights (SDRs) are issued by the IMF in times of crisis. Specifically, times of crisis with the American dollar. In a nutshell. SDRs are like a super money distributed by the IMF and circulated among governments and big central banks. They are used much in the way that Keynes and China’s proposed global currencies would have been, but they are much smaller in scope and not permanent fixtures.
SDRs are intended to be used by the biggest governments and companies as a more stable option when faced with high inflation. These SDRs, even if moved to a more permanent role in the IMF, would never be used by citizens to pay for things like groceries or even cars, but the idea of governments cooperating at the highest levels helps to solidify the idea that it might work at lower levels as well.
Who Would It Help?
So it seems that a new global currency is possible as it has made its first infant steps, but why would it be a good thing? Would it actually benefit the common citizen or just be a convenience for big banks and businesses? The short answer is, “almost certainly,” but that does not mean there are no risks or that there would be complications in other areas.
Helping the Developed World
Some of the main benefits for the developing nations of the world from a one currency system would come in the form of eliminating risk and meddling. There would be no more currency risk involved in international trade; that is, there would be no need to account for exchange rates fluctuating and affecting business.
Competition would also flourish, as nations would no longer be able to artificially drive down the prices of their goods by manipulating currency exchange. A lot of time and money wasted on foreign exchange could be put to better use elsewhere.
Helping the Developing World
A mentioned above, a one currency system fights inflation. A new world reserve currency would be a stable foundation on which a struggling country could jump-start its economy. Take for example Zimbabwe, which had to abandon its currency in favor of more stable foreign monies when its inflation crisis hit critical mass. Had there been a universally accepted currency in place, Zimbabwe would have been left with less money, but not banks full of money that wasn’t worth the paper it was printed on.
Of course, it would not all be good times for everyone. A one currency system would be monitored and regulated by an international body like the IMF. Individual, national economies would lose the power to regulate their currency to fit their specific needs.
Undoubtedly, some countries would come out on top due to the universal regulation of money, and other nations would suffer. There just likely isn’t a set of policies that will make everyone content and rich and the governing body’s best guess would be forced upon all nations.
Also, at the more tangible level, there are the issues of printing and distributing the money. They are monumental costs, and the country or countries that would be responsible would hold considerable sway over those that did not participate. Checks and balances would have to be implemented to ensure that the system was not biased toward any one nation. This task is difficult enough at the continental level in places like the EU, but the world stage would be another issue entirely.
Time May Yet Unite Us
The march of the centuries has pushed us from disparate tribes into gleaming metropolises, and our money seems to be following our example of unification. Of course, our cities accomplish a great many wonders while at the same time containing slums and other new and exciting problems.
Fortunately for us, a one currency system has shown potential already for being a viable and beneficial system for the entire world. Not everyone may agree and it may have negative consequences, but as our money grows and evolves new forms crop up like cryptocurrencies, it seems that a one world currency is coming soon whether we want it to or not.