The recent advance of the euro, which has started from nothing and ended up being a very influential currency, has had quite an effect on the world’s financial markets. It has made a significant impact in the first few years of it s existence and already countries are clamoring to get in on the act and join the euro.
Already it is used in 15 countries and will soon be used in a whole lot more, possibly around 30 within a decade. Countries that are not even in the European Union even want to join in and adopt the euro.
Europe cites the euro as the main way that unification has been achieved in Europe. Instead of concentrating on differences there is now a feeling that Europe is determined to celebrate their similarities.
Indeed, the euro is now rivalling the dollar in terms of being the most important currency. It has not yet taken over from the dollar but it may do, in which case we could well be looking at the world’s first global currency: the euro.
So, if the euro is so successful, then isn’t there a reason to think that if a single, global currency could be introduced into the world, there would suddenly be a more peaceful world?
Consider the effect that a single currency would have. In the middle east, there would be a single currency, ostensibly uniting both Israel and Palestine, or at least removing one more area of difference. Iraq would use the same money as the US. People would be able to travel and money would not be a problem. There would be a central control of money so it would be remote from each independent government. And there could be economic advantages.
Moreover we live in an age where the world has effectively shrunk. People are now able to travel in a way that they never have before. People are also able to undertake transactions electronically, which is a very new development, when considering how long mankind has existed on the planet and how long people have traded and bartered for.
The internet has also revolutionised how business is done. Even shopping is different. People have the capacity to access items from all over the globe. So a global currency could revolutionise the internet even further. This it really does seem to make sense and in fact the question should perhaps be asked why is there not a single united and global currency?
Indeed, the phrase global village is often used, so why shouldn’t this new global village have its own currency ? One that can be accessible to everyone.
Top 10 arguments in favour of a single global currency
No 1: Unity
The potential for a single currency to unite is really the top argument in favour of using a single currency. It may not hold much sway with economists but it does present quite a compelling argument. The advent of a single currency could actually help people to realise that there is much that we have in common with each other. And there is also something utopian about the concept of everyone in the whole world using the same money to buy their bread or groceries.
Instead of having lots of different currencies floating around the world and each country jealously guarding one of its main symbols of national identity, there would just be one currency and every country in the world would use it.
It is also promoted as a way of ensuring that people do start to think about living in a global village, where everyone is relatively close to each other and everyone is everyone else’s neighbors.
No 2: Elimination of Black Market
There would be no need for individuals or criminals, to try to accumulate other currencies, because they would have no worth. The fact that no other currencies would be of worth is an important one, because it means that there would be no black market in terms of trying to acquire US dollars. Many travellers who have visited less developed countries will know that prices are often quoted in the national currency, but then a discount will be offered, if you pay in dollars.
So, if you remove the need to acquire other currencies, because all currency is worth the same, then you effectively remove the need to trade illicitly.
This may mean that many economies in some poorer countries will actually benefit from the abolition of multiple currencies. Their currency will be on a par with all the rest in the world.
The black market is estimated to cost economies, particularly in developing countries, $ millions every year. It is obviously not possible to know the exact figures involved, but it is significant sums of money. If developing countries find that their economies are more buoyant, then they will need less aid from developed countries. Everyone wins.
Crime is often associated with the black markets in terms of dollars or euros and so eliminating the need for dollars may also impact on criminal activity.
No 3: Stabilising Currencies
Currently many currencies are very volatile and they could collapse at any point. But if all currencies were replaced with a stable and secure currency, then overnight, all the currencies of the world would be stabilised.
This could have a significant impact on very many countries. In some countries where inflation is rife, to suddenly have a stable currency in circulation would mean that they effectively had a clean slate, to be able to start again.
In countries such as Zimbabwe, which experience absolutely enormous levels of inflation, the use of a standard currency could actually give the country a chance to be able to get back on track and ensure that they could stabilise the economy. It would also make the regime more accountable, particularly any governments who may be diverting money away from public areas, into their own pockets. In short it would ensure increased accountability.
Currently there tends to be a vicious circle in many countries. They cannot stabilise the currency because they cannot stabilise the economy. However, they are not able to stabilise the economy because they cannot stabilise the currency and so it goes on.
At least provision of a stable currency gives countries the opportunity to have a head start and be able to get back on track.
No 4: No Need to Pay Exchange Fees
Businesses could positively boom using a single currency. There would be no need to pay any exchange fees again! Businesses could buy and sell all they liked without a single charge incurred, other than the shipping and original price of the goods. Significant sums would be saved and items such as oil, gas and other items that many countries import would be much cheaper.
Exchange rates may not seem inordinately high, but they soon accumulate into significant amounts of money and these would effectively be saved. Since all countries import and export, there may be some countries who would benefit more than others, but overall, it would even out, so that all countries benefit.
No 5: Help Countries Balance the Books
If a single currency were in use, it would be possible for countries to balance their books more easily, because they would not have to pay for import and export exchanges. Plus, there would be an incentive for countries to import more (it would be cheaper) and they would then be able to export more, since their goods would be more affordable.
So it makes perfect sense to abolish the exchange fees.
No. 6: Remove the Disparity Between Currencies
The introduction of a single currency would mean that all currencies are equal, because there is only one currency.
Therefore the dominance by one or two currencies would stop. This would be a major advantage to some of the poorer countries around the world. For example, the Algerian dinar would become (pro rata) as worthy as the US $.
This may seem as if it would somehow devalue the US $ but it would not, because the new currency would still be pro rata, so if a US dollar was worth 1 new ‘globa’ then the Algerian dinar, which may only be worth 0.5 of a US $, would still only be worth 0.5 of a new globa.
However, the major change would be that the dollar would no longer be subject to the intense scrutiny that it is currently. Since the dollar has been weak for some time and the US is still in the grips of the credit crunch, then this new currency would really take off some pressure away from the US economy.
This could also help other countries. Whenever the United States experiences problems in terms of its economies, the rest of the world also starts to have some economic blips. As such, taking this pressure off the dollar would ease pressure on other economies as well. This could actually do a great deal to promote economic stability, particularly throughout the developed world.
So the winners are not just the poorer, undeveloped countries, there are also some attractive options for the more developed country.
No.7 Tighter Control of Money
The global currency would be overseen by a single global bank. This bank could exert considerable influence over the new currency, throughout the world. It would have an expert knowledge of all the issues affecting the currency throughout the world.
This means that one bank could control every economy in the world. Thus it would also be able to exert a considerable amount of influence on economies of the world.
To some, this can sound quite sinister, after all, it sounds quite controlling. But it actually makes good sense. It would help in developing countries, particularly some of the oppressive regimes or countries where the people are quite oppressed. Corruption in these countries could be effectively wiped out.
However, the assistance given to these countries would have another knock on effect. Again, they would require less in the form of grant aid, because their economies would be more stable. So the West wins as well.
Controlling monetary policy would mean that the global bank could target special areas to have assistance, then reduce it in others where it was not needed so much.
Countries would also benefit from all money being printed by the central Bank. So any dubious practices employed by less than honest governments, would simply be stopped. The amount of notes in circulation could be tightly monitored and thereby any discrepancies would be shown up. Whereas with no central monitoring body, these discrepancies can just be covered up by governments, particularly if they control the central bank of that country, whether this control is direct or indirect.
Devaluation and other fiscal policies employed by governments would not be under their direct control. Rather, experts employed by the global bank would undertake these decisions. Since these experts would have sight of the ‘bigger picture’ they could potentially be better placed to make these types of decisions.
No.8 Take Politics Out of Money
The experts employed by the bank to make all the important decisions about monetary policy. This would effectively remove this power from politicians. Whilst this may not appeal to much to politicians, it may well be a good thing for the citizens of a lot of countries.
Decisions taken on a political level may be as a result of vested interest. For example, if an election is coming up, then a government may take action to curb inflation, so that by the time the election happens, the inflation levels will be relatively low. This will encourage more people to vote for them, than had the inflation levels been high.
However, the action taken may be a short term win, but the government may well have been aware that this was the case when it introduced the new policy. Yet it decided that winning the election was more important than the longer-term stability of the economy.
If paid officials take these kinds of decisions and they have no vested interest, apart from ensuring the continued success of the single currency, then surely, better decisions would be taken.
This aspect of the single global currency is one that is very unpalatable to politicians, since they do not like to lose power and losing power over the economy is a very great power to lose. Yet this in itself may be enough of a reason to actually take this power away from them.
No.9 Eradicate Exchange Rate Uncertainty
The introduction of a single currency would result in no more uncertainty about exchange rates. This can be a significant problem, with huge losses often accrued on the stock exchanges, because people are worried that the US $ looks weak, or the Japanese yen looks shaky.
These fluctuations can often escalate into panic and economies can take some time to recover: even if the ‘threat’ was only a blip that soon resolved itself.
So financial markets would no longer be distracted by which currency is hot and which is not. They would simply have to concentrate on the job in hand, namely selling stocks and shares.
This should single-handedly bring some stability to stock markets and as such would generate some income into all economies throughout the world, since currency would no longer be an issue.
No.10 Eliminate Risky Speculations on Foreign Exchange Markets
Foreign exchange markets have been subject to particularly high-risk activities over the last few years and as a result although great fortunes have been made there, great losses have also been made. If there was no Foreign Exchange Market, then there would be no high risk activities undertaken. Whilst this may curtail the activities of some very daring financiers, the losses incurred would be reduced and there would be some kind of equilibrium restored to economies. Instead of there being absolute highs and lows on the Foreign Exchange Market, the energy used here could simply be channelled towards the standard markets. So the energy is not being stifled, merely channelled elsewhere.
Will the single currency come into being?
Whilst the arguments in favour of a single, global currency, do seem to be extremely powerful, it would take an enormous sea change of opinion throughout the world.
It is highly unlikely that any single currency will come about in the next fifty years. But then again, fifty years ago, the concept of the internet was unheard of and yet it is part of the world in which we live today and even shapes the world we live in through increased communication.
So who knows, the single global currency may well become a reality! It is more likely that the euro will simply be replicated in other parts of the world, so there would be one currency for Europe, one for Asia, one for South America and so on. So, the world would have 10-12 currencies, instead of the hundreds that are currently in existence: but it is unlikely to ever get to be fewer than this.