Note: this article is a condensed version of a longer report published in the December 2007 edition of Forcing Change, which contains an expanded historical overview – including the role of Special Drawing Rights – and an examination of Global Central Bank scenarios.
“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 inAsia 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 global 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. Former Canadian Member of Parliament, Paul Hellyer, criticized this development in 1994, saying that under such a global currency/banking system “the interests of citizens, of individual countries must be subordinate…to the interests of international finance.”[5]
“…[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!”[6]
Unknown to my lunchtime counterpart, the idea of a single global currency has been quietly batted around in banking and economist circles since the closing days of the Second World War.[7] Over the years this call has increased in intensity. Consider some quotes,
1969: “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.”[8] — Charles P. Kindleberger, [Professor of Economics, MIT], speaking at a Federal Reserve Bank of Boston conference.
1984: “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...”[9] — Richard N. Cooper [professor, Harvard], speaking at a Federal Reserved Bank of Boston conference.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.[10]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.”[11] — Sarah Perry, Director of VISA’s Strategic Investment Program.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.[12]
In 2007, the Council on Foreign Relations propelled the idea of a planet-wide currency restructuring by publishing an article in it journal, Foreign Affairs, titled “The End of National Currency.” [Note: on the cover of this Foreign Affairs issue, 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…”[13] Stated even more succinctly, “Monetary nationalism is simply incompatible with globalization.”[14] And, “In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies…”[15]
This is quite the leap. To Steil’s credit, he pinpoints the potential chink in the world economy that could lead us towards a new financial arrangement: the weakening state of the US dollar at the global level.
Over the decades, the US dollar has become the unquestionable global currency, with nations around the world required to hold American greenbacks in order to buy and sell in various international markets, especially in relationship to petroleum. Steil writes,
“…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 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.”[16]
Recognizing the possible dollar-value scenario, Steil points to the growing concern over Chinaand other “dollar-rich central banks.” Keep in mind, China alone holds over a trillion dollars in reserves, and rumblings from the East over liquidating US dollars have started to cause a stir.
Even though Steil doesn’t ask the question, it becomes painfully obvious: What happens ifChina and other nations “fear the unbearable lightness of their holdings”? What becomes of the world economy if the US dollar is rapidly dumped by central banks?
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…”[17]
Robert Mundell, “the father of the euro,” and one of the world’s most respected economists, 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.[18]
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.”[19]
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.[20] This proposal mirrors the work of Robert Mundell, who has been traveling the globe 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.[21]
The implementation of Mundell’s plan may not be too distant as major currency blocks, led byEurope’s success with the euro, are forming in different parts of the globe. South America, the South Eastern Asian nations, and Africa are all looking to create regional currency zones. TheMiddle East too is going down this road. In fact, in 2010, if all goes according to plan, the Gulf Cooperation Council – which is made up of a number of Middle Eastern countries, includingKuwait and Saudi Arabia – will have their own regional monetary system. And the world’s fastest growing city, Dubai, is located in a key member-nation of the GCC, the United Arab Emerites.[22]
North America is also embracing 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.[23] [See the July 2007 issue of Forcing Change for a 19-page report on this development]. And if not the Amero, then some believe 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.[24] Others have likewise been examining currency options for the continent, and the momentum towards a new regional economic system binding Canada, the US, and Mexico has grown in intensity.
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 towards 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.”[25]
Bonpasse elaborates on this point further,
“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.”[26]
“The world is ready to begin preparing for a Single Global Currency, just as Europeprepared 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.”[27]
Simply put, the regional model becomes the steppingstone to a one-world currency. However, the problem of nationalism prevails. Discussing this “problem,” 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?”[28] [Italics and capitals in original]
To the internationalist, national sovereignty is the overriding obstacle. In order for a Global Central Bank and world currency 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.”[29]
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.”[30]
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.”[30]
Already the SGCA has a date in mind: 2024. Regarding 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.”[31]
“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…”[32]
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 while at a 1984 Federal Reserve conference in Bretton Woods, New Hampshire. “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.”
However, even then Cooper advanced a specific timetable to begin taking this idea seriously: “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…”[33]
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 starting to gain traction through organizations like the SGCA and through major advocates such as Robert Mundell. Moreover, the Bank for International Settlements – which is viewed as the central bank for the world’s central bankers – has publicly considered the potential for a one-world currency built around regional groupings.[34]
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.”[35]
Carl Teichrib, a Canadian-based researcher and writer on globalization, is Chief Editor ofForcing Change – a monthly intelligence journal engaged in analyzing and documenting global economic, political, and socio-religious trends. www.forcingchange.org
Endnotes:
[1] As quoted by Morrison Bonpasse, The Single Global Currency (Single Global Currency Association, 2006), p.264.
[2] Jack Weatherford, The History of Money (Crown Publishers, 1997), p.246.
[3] A.W. Clausen, in a 1979 interview with the Freeman Digest, “International Banking,” p.21.
[4] William Lyon Mackenzie King, in a radio address, August 2, 1935. Quote printed in Walter Stewart’s book,Bank Heist (HarperCollins, 1997), p.71.
[5] Paul Hellyer, Funny Money (Chimo Media, 1994), p.57. [6] Ibid, pp.57-58.
[7] Paul Volcker raises this point in his co-authored book, Changing Fortunes: The World’s Money and the Threat to American Leadership (Times Books, 1992), p.9. Volcker’s co-author was Toyoo Gyohten.
[8] Charles P. Kindleberger, speaking at a Federal Reserve conference. The International Adjustment Mechanism, Federal Reserve Bank of Boston, 1969, Conference Series 2, p.105.
[9] Richard N. Cooper, “Is there a Need for Reform?” Speech given at a Federal Reserve Bank of Bostonconference, May 1984. See, The International Monetary System: Forty Years After Bretton Woods
(Federal Reserve Bank of Boston, 1984), pp.37. [10] Quoted in The Single Global Currency, p.230.
[11] Sarah Perry, Director of VISA’s Strategic Investment Program, as reprinted in The Single Global Currency (Single Global Currency Association, 2006), p.7.
[12] Martin Wolf, writing for the Financial Times, August 3, 2004. Also quoted in The Single Global Currency, p.216. Wolf also stated, “This is a world I am unlikely ever to see. But maybe my children or grandchildren will do so.”
[13] Benn Steil, “The End of National Currency,” Foreign Affairs, May/June 2007, p.95.
[14] Ibid. p.89.
[15] Ibid. p.84.
[16] Ibid. p.93.
[17] A.W. Clausen, in a 1979 interview with the Freeman Digest, “International Banking,” p.23.
[18] Robert Mundell, “A Decade Later: Asia New Responsibilities in the International Monetary System,” presentation given in Seoul, South Korea, May, 2-3, 2007.
[19] Benn Steil, “The End of National Currency,” Foreign Affairs, May/June 2007, p.84. [20] Ibid. p.95.
[21] Robert Mundell, “A Decade Later: Asia New Responsibilities in the International Monetary System,” presentation given in Seoul, South Korea, May, 2-3, 2007.
[22] For more information on the formation of regional blocks, see the Bank for International Settlement report,Regional Currency Areas and the Use of Foreign Currencies, September, 2003.
[23] See my article in the Fall 2007 issue of Hope for the World Update on the formation of a North American monetary union. For more information on this topic, check out the July, 2007 issue of Forcing Change(www.forcingchange.org). [24] See the Testimony of Judy Shelton before The United States House of Representatives Committee On Banking And Financial Services, Hearing on Exchange Rate Stability in International Finance, May 21, 1999.[25] Morrison Bonpasse, The Single Global Currency (Single Global Currency Association, 2006), p.134.
[26] Ibid. p.229.
[27] Ibid. p.281.
[28] Ibid. p.229.
[29] Robert A. Mundell, “The International Monetary System and the Case for a World Currency,” Leon Kozminski Academy of Entrepreneurship and Management and TIGER, Distinguished Lectures Series Number 12, Warsaw, Poland, 23 October 2003.
[30] The Single Global Currency, p.282.
[31] Ibid. p.294.
[32] Ibid. p.295.
[33] Richard N. Cooper, “Is there a Need for Reform?” Speech given at a Federal Reserve Bank of Bostonconference, May 1984. See, The International Monetary System: Forty Years After Bretton Woods (Federal Reserve Bank of Boston, 1984), p.34.
[34] See the BIS 75th Annual Report, page 151.
[35] Cliff Ford, Blood, Money, and Greed (Western Front, 1998), p.50.
[2] Jack Weatherford, The History of Money (Crown Publishers, 1997), p.246.
[3] A.W. Clausen, in a 1979 interview with the Freeman Digest, “International Banking,” p.21.
[4] William Lyon Mackenzie King, in a radio address, August 2, 1935. Quote printed in Walter Stewart’s book,Bank Heist (HarperCollins, 1997), p.71.
[5] Paul Hellyer, Funny Money (Chimo Media, 1994), p.57. [6] Ibid, pp.57-58.
[7] Paul Volcker raises this point in his co-authored book, Changing Fortunes: The World’s Money and the Threat to American Leadership (Times Books, 1992), p.9. Volcker’s co-author was Toyoo Gyohten.
[8] Charles P. Kindleberger, speaking at a Federal Reserve conference. The International Adjustment Mechanism, Federal Reserve Bank of Boston, 1969, Conference Series 2, p.105.
[9] Richard N. Cooper, “Is there a Need for Reform?” Speech given at a Federal Reserve Bank of Bostonconference, May 1984. See, The International Monetary System: Forty Years After Bretton Woods
(Federal Reserve Bank of Boston, 1984), pp.37. [10] Quoted in The Single Global Currency, p.230.
[11] Sarah Perry, Director of VISA’s Strategic Investment Program, as reprinted in The Single Global Currency (Single Global Currency Association, 2006), p.7.
[12] Martin Wolf, writing for the Financial Times, August 3, 2004. Also quoted in The Single Global Currency, p.216. Wolf also stated, “This is a world I am unlikely ever to see. But maybe my children or grandchildren will do so.”
[13] Benn Steil, “The End of National Currency,” Foreign Affairs, May/June 2007, p.95.
[14] Ibid. p.89.
[15] Ibid. p.84.
[16] Ibid. p.93.
[17] A.W. Clausen, in a 1979 interview with the Freeman Digest, “International Banking,” p.23.
[18] Robert Mundell, “A Decade Later: Asia New Responsibilities in the International Monetary System,” presentation given in Seoul, South Korea, May, 2-3, 2007.
[19] Benn Steil, “The End of National Currency,” Foreign Affairs, May/June 2007, p.84. [20] Ibid. p.95.
[21] Robert Mundell, “A Decade Later: Asia New Responsibilities in the International Monetary System,” presentation given in Seoul, South Korea, May, 2-3, 2007.
[22] For more information on the formation of regional blocks, see the Bank for International Settlement report,Regional Currency Areas and the Use of Foreign Currencies, September, 2003.
[23] See my article in the Fall 2007 issue of Hope for the World Update on the formation of a North American monetary union. For more information on this topic, check out the July, 2007 issue of Forcing Change(www.forcingchange.org). [24] See the Testimony of Judy Shelton before The United States House of Representatives Committee On Banking And Financial Services, Hearing on Exchange Rate Stability in International Finance, May 21, 1999.[25] Morrison Bonpasse, The Single Global Currency (Single Global Currency Association, 2006), p.134.
[26] Ibid. p.229.
[27] Ibid. p.281.
[28] Ibid. p.229.
[29] Robert A. Mundell, “The International Monetary System and the Case for a World Currency,” Leon Kozminski Academy of Entrepreneurship and Management and TIGER, Distinguished Lectures Series Number 12, Warsaw, Poland, 23 October 2003.
[30] The Single Global Currency, p.282.
[31] Ibid. p.294.
[32] Ibid. p.295.
[33] Richard N. Cooper, “Is there a Need for Reform?” Speech given at a Federal Reserve Bank of Bostonconference, May 1984. See, The International Monetary System: Forty Years After Bretton Woods (Federal Reserve Bank of Boston, 1984), p.34.
[34] See the BIS 75th Annual Report, page 151.
[35] Cliff Ford, Blood, Money, and Greed (Western Front, 1998), p.50.
