A common cents approach to money

By Khaled Diab

With the United States and on the verge of bankruptcy, the time has come to consider a radical solution – a single global currency.

Monday 26 September 2011 

Western economies – and the global economic order they still dominate – seem to be stumbling from one debt crisis to the next: from the sub-prime mortgage crisis, which triggered the whole sorry mess, to the ongoing euro and European sovereign debt crises, not to mention the near-default of the United States on its ballooning foreign debt.

This ocean of debt in which the is being subsumed is largely due to irresponsible lending – and also borrowing – decisions fuelled by the unprecedented availability of ‘cheap credit' in consumer-driven societies apparently bent on living beyond their already-considerable means while widening the gap between the haves and have-nots.

Critics have rightly singled out the banks who, in the belief that they had magically eliminated ‘risk' through financial hocus pocus, have taken us to the edge of the abyss. They were aided and abetted in their pillage by the removal of many of the checks and balances from the international financial system.

But it is not just the architecture of that is at fault. Not only is the crisis currently being compounded and made worse by financial speculation, the unsustainable levels of sovereign debt on both sides of the Atlantic – with traditional trust in and sentimentality towards the dollar keeping the wolves at bay for now from the United States – are to a large part a product of the current currency regimen.

The United States, especially, and Europe, to a lesser degree, both possess powerful reserve currencies, which is both their fortune and misfortune, owing to the distortionary effects. Their fortune because its attractiveness to the world – both as a medium for international trade and as a held by and even individual businesses and citizens – means they can borrow at cheaper rates than they would be able to get if the dollar and euro were just local currencies.

But it has also proven to be their misfortune by providing them with debt that is so cheap that it would've been almost insulting to turn it down. In the United States, the effects of the world's willingness to lend to the treasury has resulted in a situation where four in every 10 dollars spent by the government is borrowed and total public debt is $14.7 trillion, which is roughly equivalent to the country's annual GDP.

The solutions to the debt crisis so far envisioned or rolled out mostly involve throwing more money, in addition to the trillions already spent or committed, at the system in the hopes of shoring it up and salvaging it, in what has been labelled ‘Keynesian economics'.

But perhaps the ultimate solution is to borrow another of Keynes's theories, which few are currently considering, and that would be to throw away the existing currency system altogether and replace it with a single global currency, or ‘supranational currency', which, perhaps unsurprisingly, is supported by the emerging powers of and Russia.

In the early 1940s, John Maynard Keynes, the legendary British economist, proposed the creation of what he called the ‘Bancor' which, backed by barter and its value expressed in gold, would be used for international trade transactions, thereby removing the distortions. And, at the Bretton Woods conference, Britain suggested that a supranational currency would be the best option for the post-war world order. The United States, blinded by the idea of the dollar becoming the world's reference currency, torpedoed the idea.

But as the so-called ‘Triffin dilemma' highlights, there is a fundamental conflict of interests between a national currency playing the dual role of a global reserve currency, with the inevitable outcome being ballooning deficits.

In addition to addressing this deficit disaster, a single global currency can break the destructive boom and doom cycles we are experiencing increasingly intensively. It will also remove unfair distortions in the global , remove the possibility of speculation, and even reduce inflation.

The disappearance of the dollar and, to a lesser extent, the euro in international transactions would ensure that Western economies no longer punch above their weight and developing economies no longer punch below their weights.

The decades-old debt crisis experienced by developing and under-developed countries is not only due to poor lending decisions on the part of international banking institutes and corruption among ruling elites, but also because these debts are payable in dollars and other hard currencies. In order to earn enough dollars to pay off their debts –the enormous interest and the principal amounts – poorer countries are forced to gear their economies towards maximising hard currency-earning exports.

Although critics of a single global currency point to its alleged inflexibility and how it would hinder national governments from adopting appropriate monetary policies, but it would free them up to focus more on economic policy. What critics also overlook is that a single currency, by removing currency volatility, would make international trade more efficient by removing exchange rate distortions, not to mention fairer, by giving an accurate valuation of a country's economic fundamentals.

A global currency could also be complemented by a global minimum wage.

As a first step in the right direction, a notional, electronic global currency, against which national currencies have fixed exchange rates, could be created to be used on global financial markets and for import/export transactions.

In the longer term, despite the logistical nightmare involved, a physical, single global currency should be the ultimate goal. But unlike the euro, it should come equipped with its own powerful and robust central bank in which all countries, or alternatively regional blocs, should have seats commensurate to their economic size.

A single global currency is not a panacea to the world's economic woes, but it will make the international trading system fairer and more efficient.


  • Khaled Diab

    Khaled Diab is an award-winning journalist, blogger and writer who has been based in Tunis, Jerusalem, Brussels, Geneva and Cairo. Khaled also gives talks and is regularly interviewed by the print and audiovisual media. Khaled Diab is the author of two books: for the Politically Incorrect (2017) and Intimate Enemies: Living with Israelis and Palestinians in the Holy Land (2014). In 2014, the Anna Lindh Foundation awarded Khaled its Mediterranean Journalist Award in the press category. This website, The Chronikler, won the 2012 Best of the Blogs (BOBs) for the best English-language blog. Khaled was longlisted for the Orwell journalism prize in 2020. In addition, Khaled works as communications director for an environmental NGO based in Brussels. He has also worked as a communications consultant to intergovernmental organisations, such as the EU and the UN, as well as civil society. Khaled lives with his beautiful and brilliant wife, Katleen, who works in humanitarian aid. The foursome is completed by Iskander, their smart, creative and artistic son, and Sky, their mischievous and footballing cat. Egyptian by birth, Khaled's life has been divided between the Middle East and Europe. He grew up in Egypt and the , and has lived in Belgium, on and off, since 2001. He holds dual Egyptian-Belgian nationality.

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