Currency that is widely used internationally
In
international finance
, a
world currency
,
supranational currency
, or
global currency
is a
currency
that would be transacted internationally, with no set borders.
History
[
edit
]
First European Banknotes (17th century)
[
edit
]
The first European banknotes were issued in 1661 by
Stockholms Banco
. Founded by
Johan Palmstruch
, it was a predecessor of Sweden's central bank
Sveriges Riksbank
.
[1]
As commercial activity and trade shifted northward in 17th century Europe, deposits at and notes issued by the
Bank of Amsterdam
denominated in
Dutch guilders
became the means of payment for much trade in the western world.
[2]
Spanish dollar (17th ? 19th centuries)
[
edit
]
In the 17th and 18th centuries, the use of silver
Spanish dollars
or eight-real coins, also known as "pieces of eight" extended from the
Spanish territories in the Americas
westwards to
Asia
and eastwards to
Europe
. This then formed the first worldwide currency.
[3]
Spain's
political supremacy
on the world stage, the importance of Spanish commercial routes across the
Atlantic
and the
Pacific
, and the coin's quality and purity of silver helped it become internationally accepted for about three centuries. It was legal tender in
Spain
's Pacific territories of
Philippines
,
Guam
and
Micronesia
, and later in
China
and other
Southeast Asian
countries, until the mid-19th century. In the
Americas
it was legal tender in all of
South and Central America
(except
Brazil
) and in the
US
and
Canada
until the 19th century. The Spanish dollar was legal tender in the United States until the
Coinage Act of 1857
. In Europe it was legal tender in the
Iberian Peninsula
as well as most of
Italy
including:
Milan
, the
Kingdom of Naples
, Sicily and
Sardinia
, in the
Franche-Comte
(
France
), and in the
Spanish Netherlands
. It was also used in other European states including the
Austrian
Habsburg
territories.
After
Mexican Independence
in 1821, the Spanish dollar continued to be used in many parts of the Americas, together with the
Mexican Peso
from the 1860s onward. The Mexican peso, the
US dollar
, and the
Canadian dollar
all trace their origins back to the Spanish dollar. The trace also included the use of the
caduceus sign
($), also known as the dollar sign.
[4]
Sterling
[
edit
]
Before 1944, the world reference currency was the
United Kingdom
's
sterling
. The transition between sterling and United States dollar and its impact for central banks was described recently.
[5]
U.S. dollar
[
edit
]
In the period following the
Bretton Woods Conference
of 1944,
exchange rates
around the world were
pegged
to the
United States dollar
, which could be exchanged for a fixed amount of gold. This reinforced the dominance of the US dollar as a global currency.
Since the collapse of the
fixed exchange rate
regime and the
gold standard
and the institution of
floating exchange rates
following the
Smithsonian Agreement
in 1971, most currencies around the world have no longer been pegged to the United States dollar. However, as the United States has the world's largest economy, most international transactions continue to be conducted with the United States dollar, and it has remained the
de facto
world currency. According to
Robert Gilpin
in
Global Political Economy: Understanding the International Economic Order
(2001): "Somewhere between 40 and 60 percent of international financial transactions are denominated in dollars. For decades the dollar has also been the world's principal reserve currency; in 1996, the dollar accounted for approximately two-thirds of the world's foreign exchange reserves", as compared to about one-quarter held in euros (see
Reserve Currency
).
Some of the world's currencies are still pegged to the dollar. Some countries, such as Ecuador, El Salvador, and Panama, have gone even further and eliminated their own currency (see
dollarization
) in favor of the United States dollar.
Only two serious challengers to the status of the United States dollar as a world currency have arisen. During the 1980s, the
Japanese yen
became increasingly used as an international currency,
[6]
[7]
but that usage diminished with the
Japanese recession
in the 1990s. More recently, the euro has increasingly competed with the United States dollar in international finance.
Euro
[
edit
]
The
euro
inherited its status as a major reserve currency from the
German mark
(DM) and its contribution to official reserves has increased as banks seek to diversify their reserves and trade in the
eurozone
expands.
[8]
As with the dollar, some of the world's currencies are pegged against the euro. They are usually Eastern European currencies like the
Bulgarian lev
, plus several west African currencies like the
Cape Verdean escudo
and the
CFA franc
. Other European countries, while not being EU members, have adopted the euro due to currency unions with member states, or by unilaterally superseding their own currencies: Andorra, Monaco, Kosovo, Montenegro, San Marino, and Vatican City.
As of December 2006
[update]
, the euro surpassed the dollar in the combined value of cash in circulation. The value of euro notes in circulation has risen to more than €610
billion
, equivalent to US$800 billion at the exchange rates at the time. A 2016 report by the
World Trade Organisation
shows that the world's energy, food and services trade are made 60% with US dollar and 40% by euro.
[9]
Recent proposals (21st century)
[
edit
]
Governmental
[
edit
]
- Enlargement (diversification) of the list of currencies used as reserve ones, based on agreed measures to promote the development of major regional financial centers. In this context, we should consider possible establishment of specific regional mechanisms which would contribute to reducing volatility of exchange rates of such reserve currencies.
- Introduction of a supra-national reserve currency to be issued by international financial institutions. It seems appropriate to consider the role of IMF in this process and to review the feasibility of and the need for measures to ensure the recognition of SDRs as a "supra-reserve" currency by the whole world community."
[10]
[11]
On 23 March 2009,
Zhou Xiaochuan
, then-President of the
People's Bank of China
, called for a replacement of the US dollar with a different standard using "creative reform of the existing international monetary system towards an international reserve currency," believing it would "significantly reduce the risks of a future crisis and enhance crisis management capability."
[12]
[13]
Zhou suggested that the IMF's
special drawing rights
(a currency basket then comprising dollars, euros,
sterling
and yen) could serve as a super-sovereign reserve currency, saying that it would not be easily influenced by the policies of individual countries. Then-US President
Barack Obama
, however, rejected China's call for a new global currency. He stated, "As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now."
[14]
At the G8 summit in July 2009,
Dmitry Medvedev
expressed Russia's desire for a new supranational reserve currency by showing off a coin minted with the words "
unity in diversity
". The coin, an example of a future world currency, emphasized his call for creating a mix of regional currencies as a way to address the global financial crisis.
[15]
On 30 March 2009, at the second
South America-Arab League Summit
in
Qatar
, Venezuelan president
Hugo Chavez
proposed the creation of a petro-currency. It would be backed by the huge oil reserves of oil-producing countries.
[16]
Chavez's successor,
Nicolas Maduro
, in 2018 announced the
Petro cryptocurrency
, but it does not appear to be used as a
currency
.
[17]
Single world currency
[
edit
]
An alternative definition of a world or global currency refers to a hypothetical single global currency or
supercurrency
, as the proposed
terra
or the DEY (acronym for Dollar Euro Yen),
[18]
produced and supported by a
central bank
which is used for
all
transactions around the world, regardless of the nationality of the entities (individuals, corporations, governments, or other organizations) involved in the transaction. No such official currency currently exists, although non-inflationary current funds such as MXV/UDI (
Mexican unidad de inversion
) have been used as a model for a General Global Currency (GGC), a principal reserved current fund based on a complex relationship between national currencies.
[19]
Advocates, notably
Keynes
,
[20]
of a global currency often argue that such a currency would not suffer from inflation, which, in extreme cases, has had disastrous effects for economies. In addition, many
[20]
argue that a single global currency would make conducting international business more efficient and would encourage
foreign direct investment
(FDI).
There are many different variations of the idea, including a possibility that it would be administered by a global
central bank
that would define its own
monetary standard
or that it would be on the
gold standard
.
[21]
Supporters often point to the euro as an example of a supranational currency successfully implemented by a union of nations with disparate languages, cultures, and economies.
A limited alternative would be a world reserve currency issued by the
International Monetary Fund
, as an evolution of the existing
special drawing rights
and used as reserve assets by all national and regional central banks. On 26 March 2009, a UN panel of expert economists called for a new global currency reserve scheme to replace the current US dollar-based system. The panel's report pointed out that the "greatly expanded SDR (special drawing rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity."
[22]
Another world currency was proposed to use conceptual currency to aid the transaction between countries. The basic idea is to utilize the balance of trade to cancel out the currency actually needed to trade.
In addition to the idea of a single world currency, some evidence suggests the world may evolve multiple global currencies that exchange on a singular market system. The rise of digital global currencies owned by privately held companies or groups such as
Ven
[23]
suggest that multiple global currencies may offer wider formats for trade as they gain strength and wider acceptance.
WOCU currency, based on the
WOCU
synthetic global currency quotation derived from a weighted basket of currencies of fiat currency pairs covering the top 20 economies of the world, is planned to be issued and distributed
[24]
by Unite Global
[25]
a centralised platform for global real-time payments and settlement.
Recently, the idea of creating a supranational currency GES (Grain Equivalent Standard) based on the value of the IGC (International Grains Council) grain standard has been put forward
[26]
(russian translation
[27]
). The idea is not new. For a composite commodity as an objective standard of value back in 1923. pointed out J.M. Keynes in his Treatise on Monetary Reform.
[28]
The basis of the GES monetary unit is the objective standard of value of the composite commodity in the form of grain IGC.
[29]
Difficulties
[
edit
]
Triffin dilemma
[
edit
]
Some economists argue that a single world currency is unnecessary, because the U.S. dollar is providing many of the benefits of a world currency while avoiding some of the costs
[30]
However, this de facto situation gives the U.S. government additional power over other countries. If the world does not form an
optimum currency area
, then it would be economically inefficient for the world to share one currency.
Economically incompatible nations
[
edit
]
In the present world, nations are not able to work together closely enough to be able to produce and support a common currency. There has to be a high level of trust between different countries before a true world currency could be created. A world currency might even undermine national sovereignty of smaller states.
Wealth redistribution
[
edit
]
The interest rate set by the central bank indirectly determines the interest rate customers must pay on their bank loans. This interest rate affects the rate of interest among individuals, investments, and countries. Lending to the poor involves more risk than lending to the rich. As a result of the larger differences in wealth in different areas of the world, a central bank's ability to set interest rates to make the area prosper will be increasingly compromised, since it places wealthiest regions in conflict with the poorest regions in debt.
See also
[
edit
]
References
[
edit
]
- ^
Geisst, Charles R. (2005).
Encyclopedia of American business history
. New York. p. 39.
ISBN
978-0-8160-4350-7
.
{{
cite book
}}
: CS1 maint: location missing publisher (
link
)
- ^
Gruben, W.C.; Gould, D.M.; Zarazaga, C.E. (2012).
Exchange Rates, Capital Flows, and Monetary Policy in a Changing World Economy: Proceedings of a Conference Federal Reserve Bank of Dallas Dallas, Texas September 14?15, 1995
. Springer US. p. 130.
ISBN
978-1-4615-6175-0
. Retrieved
3 May
2023
.
- ^
A Brief (and Fascinating) History of Money
Retrieved 24 Novamber 2023
- ^
Corporation, Bonnier (1 February 1930).
"Popular Science"
. Bonnier Corporation
. Retrieved
16 October
2017
– via Google Books.
- ^
"
The Retirement of Sterling as a Reserve Currency after 1945: Lessons for the US Dollar. [https://web.archive.org/web/20110709043223/http://cneh09.dal.ca/Schenk_CNEH.pdf Archived
9 July 2011 at the
Wayback Machine
", Catherine R. Schenk, Canadian Network for Economic History conference,10/2009
- ^
"CHRONOLOGY ? Milestones in the yen's history"
.
Reuters
. 13 March 2008.
Archived
from the original on 7 May 2018.
- ^
The Japanese Yen as an International Currency
Retrieved 24 Novamber 2023
- ^
Lim, Ewe-Ghee (June 2006). San Jose, Armida (ed.).
The Euro's Challenge to the Dollar
(PDF)
. Statistics Department.
IMF Working Paper
(Technical report).
International Monetary Fund
.
Archived
(PDF)
from the original on 29 June 2011
. Retrieved
9 February
2013
.
- ^
Atkins, Ralph (27 December 2006).
"Euro notes cash in to overtake dollar"
.
Financial Times
.
Archived
from the original on 17 August 2007
. Retrieved
7 May
2018
.
- ^
Russian Proposals to the London Summit (April 2009).
Archived
21 March 2009 at the
Wayback Machine
Kremlin website. 16 March 2009. Retrieved 25 March 2009.
- ^
At G20, Kremlin to Pitch New Currency.
Archived
20 March 2009 at the
Wayback Machine
Moscow Times. 17 March 2009. Retrieved 25 March 2009.
- ^
Zhou, Xiaochuan.
"Reform the International Monetary System"
(PDF)
.
BIS
.
- ^
China presses G20 reform plans.
Archived
27 March 2009 at the
Wayback Machine
BBC News, 24 March 2009. Retrieved 25 March 2009.
- ^
Obama rejects China's call for new global currency
Archived
30 May 2013 at the
Wayback Machine
. AFP, 25 March 2009. Retrieved 25 March 2009.
- ^
Pronina, Lyubov (10 July 2009).
"Medvedev Shows Off Sample Coin of New 'World Currency' at G-8"
. Bloomberg.
Archived
from the original on 13 June 2010
. Retrieved
18 November
2010
.
- ^
"Chavez to seek Arab backing for 'petro-currency' ? USATODAY.com"
.
www.usatoday.com
.
Archived
from the original on 26 October 2011
. Retrieved
7 May
2018
.
- ^
Ellsworth, Brian (30 August 2018).
"Special Report: In Venezuela, new cryptocurrency is nowhere to be found"
.
Reuters
. Retrieved
30 August
2018
.
The coin is not sold on any major cryptocurrency exchange. No shops are known to accept it.
- ^
"
"There's A New 'Dey' Coming!" - Sound The Midnight Cry"
.
www.soundthemidnightcry.com
.
Archived
from the original on 2 June 2016
. Retrieved
7 May
2018
.
- ^
"GGC Principal Issue Whitepaper"
.
- ^
a
b
"related sites"
. Singleglobalcurrency.org.
Archived
from the original on 4 August 2010
. Retrieved
18 November
2010
.
- ^
"A Single Global Currency? ? Gold Eagle"
.
www.gold-eagle.com
.
Archived
from the original on 24 February 2013
. Retrieved
7 May
2018
.
- ^
UN panel touts new global currency reserve system.
Archived
27 June 2013 at the
Wayback Machine
AFP, 26 March 2009. Retrieved 27 March 2009.
- ^
"The dollar alternatives ? Ven (4) ? FORTUNE"
. CNN. 21 July 2010.
Archived
from the original on 6 December 2010
. Retrieved
18 November
2010
.
- ^
"WOCU Currency with Unite Global | News | WOCU"
.
www.wocu.com
. Retrieved
28 October
2021
.
- ^
January 2019, 9th (9 January 2019).
"Unite Global to launch real-time correspondent hub"
.
FinTech Futures
. Retrieved
28 October
2021
.
{{
cite web
}}
: CS1 maint: numeric names: authors list (
link
)
- ^
"Global monetary system in the context of reform: supranational currency GES"
.
doi
:
10.15407/economyukr.2024.01.066
.
- ^
"Глобальная денежная система в контексте реформировании: наднациональная валюта GES"
.
- ^
"Keynes J.A. Tract on Monetary Reform. 1923"
.
- ^
"International Grains Council"
.
- ^
[1]
Archived
5 February 2005 at the
Wayback Machine
External links
[
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]
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General
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Administration
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Fiscal provisions
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Economy
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International status
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Denominations
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Coins by country with minting rights
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Potential adoption by
other countries
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History
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Previous EU members
and euro
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Preceding currencies
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Former fiscal provisions
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Proposals
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Theories
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Organisations
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