One World, One Money: The Quest for a Single Global Currency

Forcing Change (Link) - Carl Teichrib (July 12, 2011)

NOTE: This report was originally published in late 2007 in Forcing Change, and was reprinted as a chapter in the book, A Single Global Currency (Icfai University Press, 2009). Since it was first released, there have been numerous developments in the quest for a single global currency. One World, One Money, although a few years old, is an essential read in that it provides a framework to understanding this critical monetary agenda.

�A global economy requires a global currency.� � Paul Volcker, former Chair of the US Federal Reserve.[1]

�I fully support a single global currency.�

Flabbergasted, I waited for an explanation.

�That way farmers in Africa get the same pay as farmers in North America, and workers in Asia would receive the same as their counterparts in Europe and elsewhere.�

Hmmm�an interesting perspective. I asked the gentleman sitting across the lunch table; �Have you ever seriously studied banking or the historical role of money?�

His response to the negative didn�t surprise me; after all, wage equality and production values are not currency issues per se, albeit currency matters do play a role. Much of our lunch hour, therefore, was spent reviewing the relationship between money, banking, and power.

This provocative discussion, enjoyed over a steaming bowl of soup, took place at the annual meeting of a multi-million dollar Christian-based relief organization. And the person I was dining with wasn�t just an interested attendee; he was a board member representing a significant regional arm of this organization. Granted, he was only one man in a large administrative structure, but his decisions � combined with other board members � impact projects around the globe. Thus, I found his supportive statement for a world currency even more disturbing; here was an individual involved in economic decisions that impacted projects around the globe, yet he didn�t understand what he was asking for.

During the course of our lunch-hour, it was obvious that he had no conception of the incredible power-shift that would occur under such a scheme, a shift that would effectively create a global master of untouchable proportions. All he could see was an international-sized band-aid solution, �a single global currency,� to address the problem of world poverty.

I replayed this conversation after returning home, perplexed by the ease in which a person with the right motives was willing to embrace such a risky venture. Turning to the banking and economics section of my library, I thumbed through a variety of books and documents in an attempt to wrap my mind around this thorny issue. A number of interesting quotes jumped from the pages.

�The great struggle of history has been for the control over money. It is almost tautological to affirm that to control the production and distribution of money is to control the wealth, resources, and people of the world.� � Jack Weatherford, anthropologist and author.[2]

�The control of money and credit strikes at the very heart of national sovereignty.� � A.W. Clausen, President of Bank of America, in a response to the suggestion of a global central bank. [Clausen later became the President of the World Bank].[3]

�Once a nation parts with control of its currency and credit, it matters not who makes that nation�s laws.� � W.L. Mackenzie King, [former Prime Minister of Canada].[4]

All of this brings up an interesting question: Does the world need a global central bank? If you want a single world currency, it requires an international banking structure armed with a monetary policy on a planetary scale. Essentially, the requirement for a single global currency is a bank that has power over all countries, kindred, and tongues. Under such an arrangement, national monetary sovereignty � including democratic actions to change a nation�s economic/monetary direction via the ballot box � would effectively cease to exist.

This stripping of national control by a global monetary regime was couched as a positive development in a 1988 article published in The Economist. Looking to curb government-led monetary mismanagement, a problem that seems to plague every nation-state, the article suggested a radical re-arrangement: the creation of a dominant, global currency called the Phoenix. Country-level decision making, under the Phoenix, would disappear under a world central bank.

�There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate � and hence, within narrow margins, each national inflation rate � would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case.�[5]

The idea of dismantling economic decision-making at the national level was criticized by former Canadian Member of Parliament, Paul Hellyer, in 1994. Discussing a similar proposal to that of the Phoenix, Hellyer warned that under such a global currency platform, �the interests of citizens, of individual countries must be subordinate�to the interests of international finance.�[6]

��[countries] would no longer be able to pursue any kind of independent policy. Sovereignty over the most powerful of all economic tools would be turned to an international monster�A world bank run by a world kingship of international appointees collectively not accountable to anyone? Heavenly days!�[7]

Unknown to my lunchtime counterpart, the idea of a single global currency has been quietly batted around in banking and economist circles for decades � slowly gaining momentum since the Second World War.[8]

Bancor and Beyond

In 1943, economist Alvin Hansen suggested an international-economic approach to the problem of world peace. Even though Hansen�s primary interest was in promoting full employment and the development of �backward countries� in the coming post-war years, his suggestion rested on creating an International Exchange Fund (IEF) alongside an International Bank. This IEF �would facilitate the provision of adequate exchange, and especially promote adjustments leading to international equilibrium��[9]

�International equilibrium� in exchange rates effectively means the creation of a unified world currency system. Hansen also recognized the political importance of this move, and linked world federalism with his global monetary structure: �for the preservation of peace and the promotion of healthy international political relations.�[10]

That same year British economist John Maynard Keynes put together a plan for a world currency. This proposal was introduced during the run-up to the 1944 Bretton Woods conference, the gathering of Allied powers for the purpose of creating a new economy in the post-war era (Bretton Woods birthed the International Monetary Fund and the International Bank for Reconstruction and Development). Touching on Keynes� monumental concept, former chairman of the United States Federal Reserve, Paul Volcker wrote,

�It contemplated the creation of a new synthetic international money apart from the gold that countries already held in their reserves; his proposed name for it, bancor, combined the word for bank with the French word for gold.�[11]

Behind the scenes the United States of America also had a world currency proposal for the Bretton Woods meeting, directed through Henry Morgenthau Jr. and designed by US Treasury Department official, Harry Dexter White [who would later be accused of being a Soviet asset[12]. Like the British/Keynes idea, the American plan envisioned a global monetary unit tentatively named the Unitas.[13]

Robert Mundell, the Canadian economist who developed the Optimal Currency Area theory � a concept that leverages commonality among neighbouring countries to formulate a regional currency � commented on the political interactions that surrounded this 1944 event.

�President Franklin D. Roosevelt directed his secretary of the treasury, Henry Morgenthau Jr., to make plans for a world currency. Both the American and British plans at Bretton Woods included provisions for a world currency. The American plan named it unitas; the British plan named it bancor. It was never implemented for political reasons that had to do with American politics. Months before the Bretton Woods conference, the Americans withdrew their proposal for a world currency and when the British, as Lord Robbins tells us, brought up the issue, �the Americans changed the subject.� The year 1944 was a presidential election year, and isolationist forces and the next Congress might have resisted an idea that might have been interpreted as sacrificing a degree of sovereignty.�[14]

Although the White/Keynes initiatives never materialized, the Bretton Woods system did allow one currency to move into a dominant world position: The US dollar. Business and financial historian, John Steele Gordon, provides some contextual insights.

�Germany and Japan lay in ruins. Roosevelt�s assistant Harry Hopkins, flying over Berlin shortly after the war, called it, �a modern Carthage.� The Soviet Union, although greatly strengthened geopolitically, had lost a greater percentage of its population than any other country, and had had much of its most productive areas laid waste by combat. Britain and France were militarily and financially exhausted (Britain, by one estimate, expended about one-quarter of its total national wealth on the war). Their great colonial empires would soon melt away.

The vast territory of the United States and its industrial base, however, had been untouched by the war. Its productive capacity had been hugely increased and its population enriched. Its economy, by far the largest on earth before the war, now produced fully 50 percent of the world�s gross product. Eighty percent of the world�s monetary gold belonged to the United States; most of the rest was stored in the vaults beneath the New York Federal Reserve bank. Under the Bretton Woods Agreement of 1944, the dollar, convertible into gold by central banks, would be the world�s primary reserve currency and the basis of world trade in the future.� [15]

In the years following the great conflict, nations found themselves amassing comparatively large dollar reserves in order to participate in the international economy. The American greenback had become the de facto global currency, with the underlying promise of gold.

However, due to a series of inter-connected changes in the world economy during the late 1950s and early 1960s � the rising value of European currencies, the growing concern over US balance of payments and trade, and the inflationary accumulation of US reserves � central banks started to cash in dollars for gold.[16] Martin Mayer, in his classic The Bankers, noted, ��it is hard to fathom the faith of the European (and American) monetary experts who believed that the world could safely entrust the creation of its reserve assets to the proprietors of a printing press in Washington.�[17]

With the monetary cracks widening in the economic landscape, central bankers and financial ministers from the Western nations formed a powerful new club, the Group of Ten, with the task of re-vamping the international reserve structure.[18] Starting in 1963 and continuing through 1969 with a series of high-level meetings, the Group decisively recommended the creation of a new reserve asset that would operate through the International Monetary Fund (IMF).[19] It was the birth of Special Drawing Rights (SDRs).[20]

Initially based on a fraction of gold � similar to the US dollar � the SDR floundered only a few years later when US President Nixon closed the gold window. Unable to properly manage its own financial house, the gatekeeper for the world�s reserve supply collapsed the Bretton Woods system of gold convertibility. This resulted in the re-fashioning of the SDR around a basket of currencies, and the asset subsequently slid into relative obscurity as an IMF �unit of account.�[21]

Nevertheless, the creation of SDRs in the late 1960s opened the door to revisit the one-world currency discussion that had started with Bretton Woods. In 1968 Robert Mundell gave a presentation to the US Congress Joint Economic Committee titled Plan for a World Currency. Mundell was straightforward, �It is clear in what direction we need to move. We need to construct, out of all the assets currently used by the monetary authorities, a new world currency.�[22]

This desire to move towards a single global currency was also evident during a 1969 conference hosted by the US Federal Reserve Bank of Boston. Held at Melvin Village, New Hampshire, this meeting witnessed an interesting debate centered on the one-world concept.

�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.�[23] � Charles P. Kindleberger.

�I am utopian. I would like to see a world with a single money. Unlike Mr. Kindleberger, I would like to see it without a central monetary authority�A world monetary authority is a politically irresponsible authority which does not have a representative relation to the people of the world. At best, it is a benevolent dictatorship of �experts� chosen in an arbitrary way and subject only very indirectly if at all to any effective political process. A world money with a world authority is, I believe, the worst best and not the first best on both political and economic grounds. On the other hand, a unified world money without a monetary authority would be a pretty good system��[24] � Milton Friedman.

Obviously, a recognized single world currency didn�t materialize through the creation of Special Drawing Rights. Nor did the visions of Mundell or Kindleberger come to pass. However, the IMF accounting unit � which is still functioning and based on a basket of US dollars, yens, pounds, and euros � has slowly gained in acceptance. In the 2003-2004 Annual Report for the Bank for International Settlements (often dubbed the world�s �central bank for central bankers�), it was announced that shareholders would receive dividend payments based on SDRs. And the International Postal Union, a specialized agency of the United Nations, employs the SDR in its operations.

Not surprisingly, the SDR concept is still seen as a potential embryo for a one-world currency. In 2006, the president of the Single Global Currency Association wrote the following: �Someday, the four currencies in the basket will be collapsed into one, the Single Global Currency, and SDRs will disappear.�[25]

World Money and Crisis Requirements

During the mid-1970s, talk of instituting a single world currency was overshadowed by a new, yet interlocking global agenda: a �new international economic order.�[26] The objective of this movement � which emanated from Algeria and found support through the Group of Non-Aligned Countries[27] � was to change the post-gold, Bretton Woods arrangement into a more socialist oriented model.

The Club of Rome, an elite group of eminent leaders, also supported this effort. In 1976 it fleshed out what this �new international economic order� would look like. According to the Club, the world�s social, political, cultural, and economic composition needed to be re-aligned under a sweeping system of international management. Monetarily, this included a world reserve asset similar to SDRs but more �attractive,� promotion of regional monetary integration, the creation of a World Treasury agency, and international taxation powers � all with the aim of progressing �towards a world-wide monetary system.�[28]

How would citizens come to accept such radical changes? The Club of Rome understood the historical mechanism needed: Crisis.[29]

By the early 1980s, the move toward a new international economic order had essentially imploded, due in part to national differences and an overall lack in world political power via the developing countries. However, the desire to birth a global currency was still moving behind the scenes, and the person who re-ignited the idea would later become the Chairman of the Federal Reserve Bank of Boston and Chairman of the US National Intelligence Council.

In 1984, during another Federal Reserve Bank of Boston conference, Harvard Professor and Council on Foreign Relations member, Richard N. Cooper, overturned the tables by laying out a revolutionary scheme for a new world monetary arrangement.

�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��[30]

Cooper�s plan was radical, calling for a world currency around 2010. Other conference participants, such as Lord Eric Roll (then Chairman of Warburg & Co) and Ariel Buira (then Deputy Director, Bank of Mexico) favourably commented on Cooper�s plan, with Buira noting that �objections to such a scheme would appear to be largely political.�[31] In the summer of 1984, the CFR published Cooper�s proposal in its journal, Foreign Affairs. Interest in the topic had been resurrected.

Four short years later, after the market setbacks of 1987, The Economist published a cover story on the suggested Phoenix world currency. Like the mythical firebird that arises out of the ashes of destruction, this international currency would likewise emerge from the chaos of crisis. As the article noted, it would take �several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two� before politicians would accept the Phoenix and secede monetary power to a higher authority. In the end, national monetary policies would no longer exist, and a supranational central bank would run the show. Looking forward to this development, The Economist anticipated a start-up date: 2018.[32]

Since the 1980s, other voices have added support to the single global currency movement. Consider some quotes,

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.[33]

1999:

�National currencies are a phenomenon of the twentieth century; supranational currencies are the solution for the future.� � Ricardo Hausmann, Chief Economist, Inter-American Development Bank.[34]

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.[35]

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.[36]

In 2007, the Council on Foreign Relations published an article in its May/June issue with the provocative title �The End of National Currency.� [Note: on the cover 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��[37] Stated even more succinctly, �Monetary nationalism is simply incompatible with globalization.�[38] And, �In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies��[39] This is quite a leap.

In bringing us to this next stage, Steil pinpointed the hinge-crisis that could swing the world toward a new monetary order � the weakening state of the US dollar at the global level.

��the dollar�s privileged status as today�s global money is not heaven-bestowed. The dollar is ultimately just another money supported only by faith that others will willingly accept it in the future in return for the same sort of valuable things it bought in the past. This puts a great burden on the institutions of the U.S. government to validate that faith. And those institutions, unfortunately, are failing to shoulder that burden. Reckless U.S. fiscal policy is undermining the dollar�s position even as the currency�s role as a global money is expanding�

�In the absence of long-term fiscal prudence, the United States risks undermining the faith foreigners have placed in its management of the dollar��[40]

What becomes of the American economy, and the overall financial world, if faith in the US dollar collapses quickly? Or, instead of a rapid dump of dollars, it�s slowly seeped out of foreign reserves and replaced by gold, Swiss franks, euros, and/or yen? When is the tipping point reached for the globally inflated US dollar?

Steil reminds us; �There is no way effectively to insure against the unwinding of global imbalances should China, with over a trillion dollars of reserves, and other countries with dollar-rich central banks come to fear the unbearable lightness of their holdings.�[41]

All of this underscores a strategic reality that can be summed up in three words: Crisis equals opportunity. As banking mogul A.W. Clausen once said, �new comprehensive politico-economic systems across peoples almost always arise out of conquest or common crisis��[42]

Robert Mundell also views crisis as the starting point for change. In a May 2007 lecture, Mundell related, �International monetary reform usual becomes possible only in response to a felt need and the threat of a global crisis.� This Nobel Prize winner also pointed his finger to the possible trigger event, saying that the �global crisis would have to involve the dollar,� and that a world currency should be viewed as �a contingency� to a global dollar disaster.[43]

With a similar crisis in mind, Benn Steil offers what appears to be an altruistic solution. In order to avert the crisis, all that nations need to do is relinquish sovereignty before the problem become insurmountable.

�Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory. National currencies and global markets simply do not mix; together they make a deadly brew of currency crisis and geopolitical tension and create ready pretexts for damaging protectionism.�[44]

So how should monetary sovereignty by expunged? Steil candidly asserts that the world needs to re-group itself into three regional monetary units: the Dollar, the Euro, and a new Asian currency.[45] This proposal mirrors the work of Robert Mundell, who has been lecturing on a new international monetary unit based on the US Dollar, Euro, and Yen. Under Mundell�s plan these three currencies would form the basis of a world currency unit called the DEY, and the International Monetary Fund would be its manager � essentially replacing the SDR program.[46]

The Importance of Regional Currency Regions

The implementation of Mundell�s plan may not be too distant as major currency blocks, led by Europe�s success with the euro, are forming in different parts of the globe. Nations in South America, Africa, and South-eastern Asia are all looking to create regional currency zones.[47]

The Middle East too is travelling this road. The Gulf Cooperation Council � which is made up of six Persian Gulf countries, including Kuwait and Saudi Arabia � launched their regional common market in early 2008,[48] and anticipate a GCC monetary zone by 2010[49] (NOTE: 2017 is now the date being discussed).

Bankers and economists in North American are also flirting with ideas of currency integration. For years the concept of a North American monetary system has cropped up in central banking circles, with the Amero as the suggested name for the new continental currency.[50] And if not the Amero, then some believe that the US dollar should become the tri-national staple. In May 1999, economist Judy Shelton suggested the dollarization of North America to the US House Committee on Banking and Financial Services.[51]

But how do regional monetary blocks play into a Single Global Currency? Morrison Bonpasse, President of the Single Global Currency Association (SGCA), a group of economists working toward 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.�[52]

Bonpasse elaborates, �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.�[53]

�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.�[54]

Simply put, the regional model becomes the steppingstone to a one-world currency. However, the problem of nationalism prevails. Discussing this roadblock, 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?�[55]

To the internationalist mind, national sovereignty is the overriding obstacle to a unified global order. Therefore, if a Global Central Bank and world currency is 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.�[56]

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.�[57]

What would a Global Central Bank look like? The closest comparison we can make today is the Bank for International Settlements, an impermeable institution based in Basel, Switzerland.

Here are a few points to ponder, taken from the BIS Charter, regarding the untouchable nature of this banking powerhouse,

- The BIS is �immune from all taxation� including �all taxes on the Bank�s capital, reserves or profits��[58]

- The BIS headquarters, its branch offices, and any building used by the BIS are inviolable to national government officials, including national police officers.[59]

- Officials of the BIS have international diplomatic immunity, including immunity from arrest or imprisonment, �save in flagrant cases of criminal offence.� BIS board and staff members have a host of other special perks, including immigration and tax benefits that the average person can only dream of.[60]

The BIS China branch has an especially powerful provision:

�The Bank shall not be subject to any form of financial or banking supervision or obliged to implement any form of accounting standard, or to comply with any form of licensing or registration requirement.�[61]

Is this what the world needs � another ultra elite, unaccountable, unapproachable, untouchable banking monarchy � a Global Central Bank that acts as the world king?

Unfortunately, too few people understand the power and influence exerted by central banks. Steven Solomon, in his large volume on central banking, details this reality in its broader context,

�Central bankers� fingerprints are everywhere behind the daily financial headlines: the rise and fall of interest rates, the ups and downs of the dollar, the emergency rescue of a crashing stock market or a nation in crisis. But they themselves are rarely seen or understood except by an elite minority.�[62]

Solomon went on to describe global central bankers, and the BIS in particular, as �international freemasonry� � a cozy club whose dealings are hidden behind the veil of specialized transactions, technical lingo, and extraordinary influence.

Amazingly, the Single Global Currency Association suggests the Global Central Bank would operate �with open governance,� where �every decision is exposed to the Internet eyes of billions of people.�[63]

The argument against this vision of transparency is too overwhelming: Utilizing current and historic central banks as a model, it�s evident that a Global Central Bank would operate beyond anyone�s reach.

Concerning 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.�[64]

�The governing structure of the GCB should be relatively easy to design, given the available, successful models of the US 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��[65]

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 at the 1984 Federal Reserve Bank of Boston conference.

�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.�[66]

Knowing this, Cooper still put forward a specific timetable: �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��[67] Likewise, the SGCA has a date in mind: 2024.

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 gaining traction through organizations like the SGCA and advocates such as Robert Mundell. Moreover, the Bank for International Settlements has publicly considered the potential for a one-world currency built around regional groupings.[68]

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.�[69] �

Carl Teichrib is editor of Forcing Change, a monthly digest reviewing globalization at a critical level. His reports, articles, and analysis have been utilized by other authors and researchers throughout North America, and abroad.

Endnotes: