With the rise of Bitcoin and other potential cryptocurrencies that represent mobile money without borders, it may seem like this is a completely new idea. While the technologies being used may be new, the idea of a World Currency has been around for awhile. Discussion of this at the IMF has gone on for years. An example would be this 2009 IMF blog article titled “Reserve Currencies in the Post-Crisis International Monetary System”. The article traces the history of the US dollar as a world reserve currency back to the 1944 Bretton Woods Conference. It then proceeds to discuss potential competitors to the US dollar. It briefly mentions the Euro and the Renminbi, but quickly dismisses them. It then moves on to a discussion of possibly using the IMF’s Special Drawing Rights (SDR’s) as a world reserve currency. However, the article notes that has drawbacks too. It then moves on to the more interesting concept of a new kind of global currency. Here is a quote from the article.
“An even more ambitious solution would be to move to a truly global currency, along the lines of Keynes’s “bancor”, that would circulate alongside countries’ own currencies and would offer a store of value truly disconnected from economic conditions and policies in any country. To achieve this, one would need to set up a global monetary institution that would issue the global currency depending on global economic conditions, and that could act as a global lender of last resort. It would need to have an impeccable (“AAAA”) balance sheet, and governance arrangements that engender widespread credibility and acceptability.”
If we stopped reading at the end of the bolded italics, we might conclude that sounds like Bitcoin or other similar cryptocurrencies. If we continue reading though, we see it is different. The global currency described here would need to set up a “global monetary institution that would issue the global currency”. This would be more like the GSD that Klickex is working on that we discussed in an earlier article in Bitcoin Magazine.
There have been other articles in the past that talk about a global currency. But an article that appeared in a January 1988 issue of Economist Magazine is one I find truly incredible. If you think how different the world was in 1988, the precise predictions made in this article are quite amazing. The idea of a new “World Currency” of any kind was not in the mainstream of public thought.
I have posted the full article here for anyone wanting to read it in its entirety. But let’s take a look at a few interesting quotes from the article and add some comments here and there (comments in bold type). Here is the opening paragraph. You might try inserting the SDR or the Klickex GSD where you see “phoenix”.
“THIRTY years from now (i.e. 2018), Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favored by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.”
At this point we could be talking about Bitcoin or any new cryptocurrency out there today. Let’s continue as the article talks about what could lead to this “New World Currency”.
“. . . not long after the next currency agreement is signed it will go the same way as the last one. It will collapse. Governments are far from ready to subordinate their domestic objectives to the goal of international stability. Several more big exchange-rate upsets, a few more stock market crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by a patch-up followed by emergency, stretching out far beyond 2018 – except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very trends that will make it mount are making the utopia of monetary union feasible.”
Pretty good forecast I would say. We have seen a “muddled sequence of emergency, followed by a patch-up, followed by emergency” play out before our eyes.
Next is a statement that will get the attention of the Bitcoin user. Remember, this was written in January 1988.
“As telecommunications technology continues to advance, these transactions will be cheaper and faster still.”
Here we might still be talking about Bitcoin. But then the article turns towards something different. Something more like the SDR mentioned above (or even the Klickex GSD we wrote about in the earlier article here).
“The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF.
This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.”
Now we see that this new World Currency would come from a new Central Bank that would mean a loss of sovereignty for individual governments. Not like Bitcoin. The article continues:
“Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.”
Bitcoin users reading this article might see a lot that looks like Bitcoin in “the Phoenix.” However, the article actually talks about something more like the SDR. Maybe even something like the GSD (Global Stability Dollar) unveiled last year by Klickex. The difference being, the last two would be regulated by the banking system as the Economist article was clearly anticipating. Regardless, this 1988 article was obviously ahead of its time. It shows that a new kind of world currency is not a new topic of conversation. And the mention of 2018 looks eerily realistic as we watch things unfold today.
