Case in Point: A One World Currency

Since the value of the United States dollar has been jumping around nonstop compared to the difference currencies of other nations, talks about coming up with one currency to be used by the entire world have begun to occupy the minds of many policy makers. It may sound like a very simple and logical idea. But like most simple ideas, it would most likely come with a barrage of highly complicated as well as unintended consequences.

World Currency: Of Chinese Origins

It was only recently that many Chinese leaders have begun arguing and pushing for the institution of a global currency that would unify most (if not all) of the economies of the world. This is one concept which has been submitted as a proposal by several political officials and academicians who study the modern economic history. While such an idea is yet to gain widespread support, looking at the success created by the Euro would most likely show us that having currency unification may also work and could produce really good economic benefits. However, there might be a couple of ramifications should the adoption of the universal currency take into place in terms of global trade as well as national economics. Such a proposal by the Chinese was simple a part of the efforts made by Beijing to further position themselves more prominently as a global power during the last meeting of the G20 summit. And of course, there were several legitimate reasons for bringing about such an idea of changing the dollar as our reserve currency with a unified currency.

Reasons to Be Concerned

Currently, China is the holder of around two trillion dollars in savings that are dollar-denominated. Because of this amount, the Chinese government certainly has a lot of reasons to be concerned regarding the strength of the United States dollar. There used to be a method that was at one time honored which could reduce the large debts of a government by slightly inflating their currency in order to decrease the actual value of their debt. And of course, such a practice would invariably devalue the two trillion dollar amount of Chinese savings. The role of the dollar as the current reserve currency of the world also means putting the United States in a much more dominant role in the entire global economy. With this, a lot of other countries do find themselves subject to the United States monetary and fiscal policies – which, of course, none of them would have a significant amount of control over. With this picture, it is not surprising to note that China is adamant about putting another entity in action. In fact, it has already asked the IMF or the International Monetary Fund to issue that global currency.