Lack of a Credible Alternative Global Currency to the U.S. Dollar

Currencies / Fiat Currency May 23, 2009 - 03:21 AM GMT

A crisis is not a good time for seeking alternatives to the US dollar. Most likely, the dreams about new regional currencies will be put aside. The countries, which originally supported those ideas, gradually change their minds. The United Arab Emirates refused to participate in the Arab currency union. The expansion of the euro zone is not likely to happen in the nearest future. The Russian ruble is no longer ambitious either.

The subject of new alternative reserve currencies appeared when the crisis was gathering pace. Numerous publications reported about the possible introduction of the new currency in North America, the Amero. The Russian government put forward the idea to make the Russian ruble become a regional reserve currency too.

It seems that the subject of new currencies has been pushed into the background now. Many experts said that it would be extremely difficult and even impossible to launch such massive projects during the time of the crisis.

Official spokespeople for the foreign ministry of United Arab Emirates stated Wednesday that the nation would not be a part of the currency union in the Gulf, RIA Novosti news agency reports.

The decision to establish the Arab currency zone was made several years ago by Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar and Oman. Oman has already pulled out from the agreement. The UAE’s refusal to participate in the currency union of the Persian Gulf weakens the monetary unity of the Arab countries of the region.

The decision is based on purely economic reasons for there are no political differences between the countries. The refusal to take part in the union is most likely connected with the economic crisis. It is worthy of note that many key issues – the budget deficit restriction, the inflation rate and many other macroeconomic indexes - remain unsolved.

The euro, for example, retains its current position owing to the fiscal discipline of the members of the European monetary union. The countries of the euro zone observe the stability and development agreement, which restricts budget deficits (three percent of the GDP is the maximum) and sovereign debts (60 percent of the GDP) of the members of the currency bloc. That is why the present members of the euro zone were highly skeptical about the expansion of the European Union under the conditions of the crisis.

The euro was introduced to simplify the turnover of commodities between the European states: together these countries make a self-sufficient region. Unlike Europe, the Arab states are focused on the export of their products to the West and to Asia. Therefore, the introduction of the joint currency may not produce the desired effect.

Darya Yurischeva
Bigness.Ru

Pravda.ru

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Comments

Morrison Bonpasse
23 May 09, 10:00

Time to Research and Plan for a Single Global Currency

The world has changed a lot since the U.S. Dollar became the global reserve currency, and now is the time to plan for a Single Global Currency, managed by a Global Central Bank within a Global Monetary Union. Such a Single Global Currency will provide what the people of the world

want - stable money.

The success of the euro has shown the benefits of monetary union, but the primary problem for the euro and every regional monetary union today is that they must still exist in the multicurrency world where the value of its currency will fluctuate against other currencies.

If 16 countries can use the same currency, why not the 192 U.N. members? Those 192 countries now use 141 currencies and the number is dropping annually. The euro is definitely a harbinger of the future, and soon all 25 EU members will be part of the EMU, and by then, there will be more EU members to add. Several of the remaining non-euro EU members are now seeking admission as soon as possible. The IMF has even urged several EU members to "euroize" even before completing the standard accession

process.

In addition to eliminating currency fluctuations, the use of a Single Global Currency would eliminate the current foreign exchange trading expense of $400 billion annually, eliminate currency risk, eliminate current account imbalances, eliminate the need for foreign exchange

reserves (now totaling more than $6 trillion); and bring other benefits worth trillions, such as reducing the impact of global financial turmoil such as we are now experiencing.

The Single Global Currency Assn. (www.singleglobalcurrency.org)

promotes the implementation of a Single Global Currency by 2024, the 80th anniversary of the 1944 conference. That’s only 15 years away.

The world is moving toward a Single Global Currency through the creation, expansion and merger of regional monetary unions. Another route is through international monetary conferences proposals and agreements, such as were seen at Bretton Woods. The merger of the eurozone with one or two other currencies is one possible route to a

Single Global Currency.

The next major realignment of the world's major currencies should be to a common currency managed by a monetary union central bank. When such

a currency supports countries with 40-50% of the world's GDP, that currency will become the defacto Single Global Currency, and the "tipping point" momentum will favor its continued growth, until it supports all the countries of the world.

The challenge now is to reach that goal deliberately, as soon as possible, with as little cost and as few crises as possible. If the eurozone were to merge with the U.S. dollar of the yen, or if the yen and the U.S. dollar were to form a monetary union, the road to a Single

Global Currency would be clear.

The only remaining questions about implementation of a Single Global Currency are: when? and how much cost and turmoil will the world endure before that implementation.

See the book, "The Single Global Currency - Common Cents for the World."

Morrison Bonpasse

Single Global Currency Assn.

Newcastle, Maine, United States

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