30 August 2005. "FM sets out its stall"  by Laurence Mackin, Warsaw Business Journal

  Poland will not be able to join the single currency until three years after it joins the eurozone, according to the Finance Ministry.

  The Ministry says it will need six months to prepare for at least two years of mandatory membership in the pre-euro ERM-2 currency regime. It would take another six months for the European Central Bank and the European Commission to assess whether Poland qualified for membership and for the EU finance ministers to decide when it can join the euro area.

  In a document that reviews all technical aspects of Poland's progress towards the euro, it says: "About three years must pass between the strategic decision by national authorities about joining the eurozone and adopting the common currency.

  The outgoing government said Poland should meet all eurozone membership criteria, including the crucial budget-deficit limit of three percent of GDP, in 2007 and that euro adoption would be possible in 2009. But the timetable will depend on the new government formed after elections on September 25 and the Ministry's document gives no specific dates or targets.

  One key decision will be when to peg the zloty to the euro in the ERM-2 grid. Some officials have said it could happen as early as April next year, but several economists and some central bankers are skeptical and say 2007 is the earliest possible date. (Reuters)

 

30 August 2005. "European Meltdown"  by Ross Clark in The Telegraph, U.K

From the conclusion of this article, pessimistic about the euro...

  "...While it won't be this year or next year, it will come as no surprise if, beyond that time frame, withdrawal from the euro becomes a winning election issue."

 

30 August 2005. "Tanzanian business may sue Kenya on customs breach"

Excerpts about monetary union follow....

  DAR ES SALAAM (Reuters) - Tanzania's business community threatened on Monday to sue Kenya for breaking the rules of a customs union reached earlier this year, after Nairobi zero-rated imports of pharmaceutical products.

  The East Africa Community (EAC), made up of Tanzania, Kenya and Uganda, set a common external tariff (CET) in January 2005 with bands of 25 percent on finished goods, 10 percent for semi-processed goods and zero for raw materials.

   The three countries hope to form a common market by the end of 2007 and a monetary union in 2009, but analysts say repeated complaints by various business groups in the region could derail the plans.

 

30 August 2005. "Belarus to further delay introduction of Russian ruble - National Bank"  from Interfax.

  Minsk - Belarus will not enter the Russian ruble into circulation from January 1, 2006 for technical reasons, National Bank Chairman Pyotr Prokopovich told a news conference on Monday.

"This timeframe is unrealistic for technical reasons," Prokopovich said.

  The National Bank chairman also said that the schedule of forming a Belarussian-Russian monetary union depends on the two countries' leaderships. The Belarussian and Russian presidents have reached an agreement under which the formation of the monetary union will be preceded by the adoption of the Union State's constitutional act, the creation of a legal foundation and the evening up of economic conditions for the two countries' companies and citizens.

  The introduction of the Russian ruble in Belarus was initially planned from January 1, 2005, but the date was subsequently put off until January 1, 2006.

20 August 2005.  "Plan must be for Pacific"  by TK Jayaraman [member of the Board of Advisors of the Single Global Currency Assn.] in the Fiji Times.

In this article about Pacific Island cooperation, he wrote about the common island currency....

  Both single market and single currency are advanced concepts for which PICs [Pacific Island Countries] are not ready yet.

Although single market and single currency were adopted as the goals of the CARICOM [Caribbean Community] a long time ago, progress is understandably slow, as they involve sacrifices of some measure of sovereignty. Aside from sovereignty issues, empirical studies on the feasibility of a common currency for PICs, either on their own or by adopting the Australian dollar, have indicated there has been no convergence observed in any economic real variables, such as gross domestic products, inflation and real exchange rates of the PICs and Australia and New Zealand. (Bowman 2004, Jayaraman 2001, 2005b).

  External shocks experienced by PICs and Australia and New Zealand in the past have been asymmetric in nature and hence, they are unsuitable candidates for a common currency at this stage since common fiscal, monetary and exchange rate policies would not be appropriate either for PICs or for the union as a whole. (Bunyaratavej and Jayaraman 2005, Jayaraman 2005a, 2005c, Jayaraman, Ward and Zu 2005).

  Although it could be argued that most of the real economic variables such as real exchange rates are endogenously determined and hence a common currency can be adopted (Duncan 2005), one has to recognise the presence of inherent risks, which are likely to be far greater than the anticipated gains.

  There will be no easy exit from a common currency arrangement once established and it will only be at a very high cost (Worrell 2003, Farrell and Worrell 1994).

  Having been aware of the high risks involved in a currency union, the Heads of Governments of CARICOM did not want to take any chances and they prescribed the pre-union convergence criteria, similar to those imposed by the Maastricht Treaty for adopting the common currency, the Euro.

 

18 August 2005  "Academics Call for East Asian Monetary Union"   at english.chosun.com.

The entire article...

  Academics on Friday called for Asian nations to form a regional cooperative body with feature of the European Union and adopt a common East Asian currency.

  The academics from Korea, China and Japan met in Seoul for an international seminar on exchange-rate cooperation between Korea, China and Japan, which they said was badly needed.

  Uri Party lawmaker Chung Duck-koo, who was head of the organizing team committee said, "The idea of a unified Asian currency is not, in the end, a wild dream... We must hurry discussion on exchange rate cooperation by holding regular meetings of the Korean, Chinese and Japanese finance ministers and central bank governors."

  The director of China's Academy of Social Sciences Institute of World Economics and Politics, Yu Yongding, said, "We must develop cooperation focused on the Chiang Mai Initiative, which allows the ASEAN +3 states to use each other's foreign exchange reserves when shocks like foreign exchange crises strike, and establish an Asian regional body to carry out a role like that played by the European Commission."

   Prof. Kawai Masahiro of Tokyo University, an advisor to the Asia Development Bank president, said there was also a need to invigorate the Asian bond market so Asian nations can use their vast foreign exchange reserves more effectively within the region instead of buying U.S. government bonds.

   An expert with the Korea Institute of Finance (KIF), Choi Gong-pil joined Yoon Deok-ryong of the Korea Institute for International Economic Policy in calling for an "Asia Currency Unit" based on a common basket to stabilize Asian exchange rates and use it in regional trade and asset management.

  Prof. Barry Eichengreen of the University of California at Berkeley proposed Asian nations adopt a dual currency system where they circulate both the national currency and the Asia Currency Unit simultaneously.

 

17 August 2005  "Malawian economists caution on SADC common currency "  from the Chinese News Agency.

Excerpts...

LUSAKA, Aug. 18 (Xinhuanet) -- Malawian economists from various institutions cautioned the government not to rush in endorsing the idea of having a common currency in the Southern Africa Development Community (SADC) region, local newspaper The Malawi Nation reported Thursday on its website....

  Chancellor College head of economics Ephraim Chirwa said a common currency would benefit Malawi since it would help solve thecountry's problem of insufficient foreign exchange when importing goods from other countries like South Africa.

   But he quickly pointed out that whether it was the right time for the implementation was another question.

   "The benefits are there but it's the conditions for the implementation that are not there," said Chirwa. "There is a need for a fully integrated free trade in the region before we can be talking about having a common currency."

 

17 August 2005 Voice of America: Southern African Development Community considers common currency By Ndimyake Mwakalyelye
Excerpts...

Nations of the Southern African Development Community are meeting in summit this week in Gaborone, Botswana, location of SADC headquarters, but the organization is very likely to do all it can to avoid tackling the Zimbabwe crisis, some analysts say...

But the Zimbabwe crisis did not officially figure on the SADC agenda, dominated by the question of how Africa should be represented on the U.N. Security Council, trade, and regional integration, including a proposed common currency for the area.

 

15 August 2005. "Single currency for southern Africa? "  by Claire Bisseker , The Sunday Times, South Africa.

Excerpts...

   Technocrats in back rooms are laying the foundation for a monetary union that aims for the 14 Southern African Development Community (Sadc) countries to adopt a single currency and central bank by 2016.

    Reserve Bank governor Tito Mboweni, as chairman of the Sadc committee of central bank governors (CCBG), has put his considerable energy behind convergence, going so far as to suggest that the single currency should centre on those of the most powerful economies, SA and Botswana...

The timetable for integration has been agreed to by the Sadc council of ministers. It calls for the abolition of tariffs and nontariff barriers by 2008; an SADC-wide customs union by 2010; a common market by 2015; and a single currency and central bank by 2016...

15 August 2005. "Has the euro got a long-term future? Now may be the time to find out" by Brendan Keenan of the Irish Independent.

Excerpts...

It is very strange that the same people will argue for the idea of large "federal" transfers to under-performing economies, while being dead against the idea that the economies concerned raise the funds themselves by running deficits.

Deficits on their own are no solution to the eurozone's problem, which is poor growth and the related loss of confidence.

But they should be part of the solution, giving governments breathing space while they introduce reforms which will improve their countries' potential growth and increase confidence in their long-term financial stability.

The best time to start such a process is when the economy happens to be on a cyclical upturn anyway. Such an upturn may now be under way in the eurozone, although oil prices and currency movements remain a danger to this optimistic view.

If it is, what should be the ECB response? The Bank cannot ignore the changed politics of Europe either.

The project which brought forth the ECB may not survive unless the mood improves among the citizens who use the euro.

The ECB was probably right to refuse to cut rates, which would do little good in present circumstances.

But it might also be right not to raise them as quickly as its models suggest if circumstances improve.

The euro area needs a period of above-average growth if governments are to have any chance of tackling its underlying weaknesses.

9 August 2005. "Asean 38-years-old, and not 'sexy' enough" by ACHARA ASHAYAGACHAT in the Bangkok Post.

  Asean is facing two big challenges, realising a single market and production base by 2012 and making itself known and accepted by the 600 million population of the region, experts said yesterday.

  They were speaking at a seminar to commemorate the founding of the Association of Southeast Asian Nations (Asean) 38 years ago.

  Krirk-krai Jirapaet, former permanent secretary of commerce, said the regional grouping's aim of a single market and production base by 2012 by six of the 10 Asean members could be achieved only through "planned evolution''.

  "To have a real free flow of capital, technology and people, not to mention a common currency, the leaders must have the political will to make it happen, along with liberalisation of the mindset of each country's bureaucrats,'' he said.

 

7 August 2005.  Niall Ferguson considers the possible Italian withdrawal from the euro: " 'Italy despairs of euro' - in normal times, it would be front page news"  from the Daily Telegraph, U.K.  (Published in the Los Angeles Times on 8 August as: "Don't bank on the lira")

Excerpts...

...The Italian turn against the euro does not, it should be stressed, mean that the single currency will fall apart tomorrow, devoutly as some Eurosceptics would wish to see that. Both Maroni and Berlusconi have their eyes on next year's elections, which it is quite possible that their four-party coalition will lose. In any case, there is no exit clause in the treaty of Economic and Monetary Union. Unilateral secession of the sort the Italians seem to be contemplating would have unforeseeable but certainly high costs as investors fled Italian assets and shunned whatever "new lira" the Bank of Italy printed. ...

   How far can this recession legitimately be blamed on the euro? The obvious answer is that Italian exporters have fallen victim to the currency's recent strength. In the two years from February 2002 the euro appreciated by nearly 50 per cent against the dollar; only in the past few months has it shown signs of weakening. Nothing is easier than for Italian politicians to accuse the European Central Bank of being too slow to cut interest rates - especially now that it is run by a Frenchman. Yet this will not quite wash. For one thing, Messrs Maroni and Berlusconi are conveniently forgetting that it was the euro that saved Italy from a looming fiscal crisis. In the mid-1990s Italy's public debt was the highest in Europe at 125 per cent of GDP; interest payments were consuming ever more of the government's budget. Then, at a stroke, EMU cut Italian interest rates by half. That, indeed, was the principal reason the Italians went for the euro in the first place - because it promised to give them German interest rates. And it delivered...

   But if the delightful things about Italy really are to remain unchanged, something more than monetary musical chairs is now needed. To change currency once in the space of six years is unfortunate. To do so twice would look like negligenza.

 

7 August 2005.  From the Pakistan Daily Times: ‘Euro may become top reserve currency by 2022' ]

  Quoting from the National Bureau of Economic Research article, "Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency?" , the article begins:

  WASHINGTON: The euro could supplant the dollar as the world's dominant reserve currency within 20 years if Britain and other European Union countries adopted the unit and the greenback continues to slide, a recent study showed.
The paper, released by the National Bureau of Economic Research this week, outlined two key criteria for a change of the current status quo — where about two thirds of world's central bank reserves are denominated in the US currency. First was the scope for expansion of the euro zone so that it tops the gross domestic product of the United States and envelops London's dominant international financial center....

4 August 2005. "Editorial View: A common currency will be its own politics" from the Times of India.

  By now, globalisation has become a cliche. But the creation of regional economic blocs is an unmistakable trend, witness the growing numbers coming into existence — the EU, Nafta, Mercosur, Asean, Ecowas, Apec, SADC, GCC, Saarc, to name a few. South Asia is no stranger to this trend. India has already concluded free trade agreements with Sri Lanka, Nepal and Bhutan, and is negotiating one with Bangladesh. Realising the imperatives of regionalisation, the 2004 Islamabad summit committed itself to the creation of a South Asian economic union.
For an economic union to work, a common currency is the logical next step. Europe has the euro, the GCC is negotiating a common currency, many countries peg their currency to the dollar. A common currency reduces transaction costs, removes uncertainty about exchange rates, and promotes pricing transparency. In economic matters, the vision is often the thing. If South Asian governments were to shed their timorousness and raise the bar by promoting a common currency, they would reap a rich harvest in terms of investments and trade throughout the region.
Political union is not of the essence here. Europe was marked by political disunity in the previous century, triggering two devastating world wars. It was precisely to overcome this divisive legacy that its leaders envisioned a new Europe bound together by economic threads, of which a common currency is the logical culmination. The euro may have become a target of temporary populist scapegoating in certain Western European countries that are struggling economically. But they know that the euro is not responsible for their woes, and their economic condition would worsen if they ditched the unifying currency.
To calm the fears of those who consider it too radical a move in the South Asian context, a common currency could be launched initially as a parallel currency, to run concurrently with existing currencies. As its benefits become widely apparent, it could then be adopted as the sole currency.

[For COUNTERVIEW, see "Political union necessary for such a currency"]

[Also, in response to the editorial, the Single Global Curency Assn. wrote a Letter to the Editor of the Times of India in support of the single global currency, as the logical next step with the regional monetary unions.]

 

4 August 2005. Calling for an Asian common currency in "Call for Asian economic bloc" by Susan Tam for the Malaysia Star.

The article begins:

   ASIAN economies will not be able to expand for long and will lag behind bigger players if a strong monetary union or economic bloc is not formed, finance and economics academician Prof Dr S. Ghon Ree said.

  Asian economies tend to operate as isolated markets which are not integrated into global market activities, a trend that is detrimental to Asia.  

  To tackle this issue, Prof Ghon Ree suggests that an Asian common currency and an Asian Bond Bank (ABB) be implemented. 

  “By having a common currency, it eliminates exchange risks and allows for a more liquid and homogenous bond market,” he told reporters after giving a lecture on Asean+3: Asian Bond Market Initiatives yesterday, the first of a lecture series, titled Tun Ismail Mohamed Ali Chair in Investment and Finance, of Universiti Kebangsaan Malaysia. ...

[See also,  "Currency Unification Can Create Bigger And Deeper Bond Mart" , about Prof. Rhee's recommendations, from the Malaysian State News Agency, Bernama.com.]

 

2 August 2005 Common Currency for Asia? See excerpts in "Viet Nam's contribution to ASEAN praised" from Vietnam News Agency.

  Ha Noi (VNA) - Secretary General of the Association of Southeast Asian Nations (ASEAN) Ong Keng Yong spoke highly of Viet Nam's active contributions to ASEAN's principles of equality and fairness after it joined the regional club in July 1995....

  Regarding the prospect of an ASEAN common currency, Ong said: "Common currency is quite difficult, because many of our countries are just newly independent. Even today, we have some problems. Small countries like Cambodia, Brunei, or Singapore want to have their own currencies because this is part of their national development, part of their sovereignty. They will say, well, we are part of ASEAN, but we don't want to use neither Euros nor dollars, we can continue to use our own currencies. Actually in the finance minister's discussion, we have this problem: We have ten different currencies, as strong as each of us, how can we protect ourselves from attacks of other currency traders? Now the finance ministers of ASEAN will come together and make sure there is good financial cooperation. So there's no need for ASEAN to have a single currency."

 

2 August 2005. "INTERVIEW/Eisuke Sakakibara:Is a common Asian currency the goal?"   By MANABU HARA, asahi.com

  China grabbed the world's attention with its decision to revalue the yuan by 2 percent to 8.11 against the U.S. dollar. More importantly, it also ended the currency's peg to the dollar, linking it instead to a basket of currencies presumably including the dollar, yen and euro. In an interview, Eisuke Sakakibara, a Keio University professor who was known as "Mr. Yen" when he served as vice finance minister for international affairs, said the revaluation itself is less significant than the country's move to a managed float. Sakakibara also said that China's move could open the way for Asian countries to create a common currency in the future. ...

 

1 August 2005.  Death of Willem Duisenberg, "First European Bank President" (New York Times obituary)

BERLIN, July 31 - Willem F. Duisenberg, the blunt-spoken Dutch central banker who oversaw the introduction of the euro as the first president of the European Central Bank, was found dead on Sunday in a swimming pool at his villa in the south of France, the French government said. He was 70....

29 July 2005. Chinese official recommends regional monetary union.

In the article, "Asian bloc to promote economic cooperation"  by Susan Tam in the Malaysia Star, excerpts state

  "...China Development Institute president Prof Li Luoli asserted that China was willing to work with other countries and wanted to change the misconception that the country was a threat. 

He also suggested a single common currency be introduced for Asian economies as part of efforts to promote economic integration. 

  'However, this will pose challenges as the different cultures, mindsets and mentalities in the Asian economies are a hindrance to accepting a common currency, unlike countries in Europe.'..." 

 

22 July 2005. "China No Longer to Peg Currency Only to Dollar"

9 July 2005. "A Single Global Currency? Sure, why not. But, only if it's Gold and Silver Bullion!"  by Alex Wallenwein

The article begins...

  There is a fledgling organization at work whose aim it is to foment a new drive among academics and financiers - and ultimately among politicians and those who elect them - toward the implementation of a single global currency.

  This organization appears to be a private one, founded by a Maine businessman who once ran for that state's legislature in 2002 and lost. This organization holds annual meetings at the Bretton Woods, NH, mountain resort where the precursor to the current dollar reserve system, originally under a dollar-led gold exchange standard, was first formed in 1944. The first meeting of this organization was held last year. The next one is coming up on July 14 and 15.

 

6 July 2005. Martin Wolf of the Financial Times responds to Single Global Currency Assn. question about G-8 conference and planning for the Single Global Currency. (See below for that exchange and subsequent emails.)

  In a July 2 column, Martin Wolf asked for feedback on what the G-8 conference should do, and the single Global Currency Assn sent an EMAIL with the subject: When will the G-8 initiate the planning for a Single Global Currency?

  His July 6 column, "G8: What is it for and how can it help the planet?" carried the question, among others, and he answered:

    "When will the G8 initiate the planning for a single global

      currency? [emphasis added on website]

  I believe a world currency may be a reasonable objective for the very long term. But it is not politically or, in my judgment, economically feasible at present. Monetary sovereignty is too important to too many countries.

  In addition, the changes in relative prices needed to cope with the rise of China, India and other emerging nations are too large without currency flexibility. So, for the moment, we need to make a success of a world of floating exchange rates."

[To which morrison bonpasse, of the Single Global Currency Association responded by EMAIL:]

    "Yes, but for how long must the "at present" or "moment" last? Given the overwhelming propsective benefits to the people of the world which will come from a single global currency, don't the leaders of the world have an obligation to begin planning for its implementation? Shouldn't the welfare of the people of the world be more important than the clinging to the often poorly used power of monetary sovereignty?  While there is currently stress in the eurozone, the addition of ten new countries over the next few years will reinforce the view that countries CAN choose the right monetary goals, i.e. stability over control. 

    A 20-year plan would be reasonable. Just setting the Implementation Date as a Goal would be a major step and would encourage much needed research. Even announcing a goal of 30 or 40 or 50 years would be helpful. 

    Taking the cue from your August 3, 2004 column where you wrote, " But if the global market economy is to thrive over the decades ahead, a global currency seems the logical concomitant," then cannot reasonable people plan for such a "logical concomitant", even if it's for our children and grandchildren? "

[To which Mr. Wolf responded by EMAIL on 6 July with:]

"Half a century perhaps."

[To which morison bonpasse responded by EMAIL on 6 July:]
"Thanks very much.  If you were to request in your column that the leaders of the world should begin planning for a single global currency by the year 2055, that would be very helpful.  By Setting a Date, you would add a touch of reality to the prospects.
Then people could start to analyze the schedule, with such questions as, "What would the Global Central Bank look like, and by what date would it have to be established?" and "What kind of reserves would be needed, if any?" and even "What should be the name of the single global currency?"
It took about 30 years to plan and implement the euro."

1 July 2005 "Calling for a Global Currency" by Joan Veon, WorldnetDaily.com

    BASEL, Switzerland – The Bank for International Settlements today released their 75th Annual Report to commemorate its founding in 1930....

   Recommendations include what several academics have suggested by way of establishing a single international currency or perhaps moving to regional currency blocks such as the dollar, euro and renimbi-yen. A year ago, former U.S. Federal Reserve Chairman Paul Volcker told WorldNetDaily: "A new mechanism was needed for the world financial system" and that "in a globalized world, we should have an international currency ."

 

30 June 2005. 75th Annual Report of the Bank for International Settlements - notes that a single global currency might solve the world's financial imbalances.

In the "Conclusion, How might imbalances be fixed?"

   "....Several academics have suggested the establishment of a single international currency.  In the context of the impossible trinity, this would imply national authorities relinquishing domestic monetary control and moving away from still existing capital controls. A more realistic recommendation might be to have a small number of more formal currency blocs (say, based on the dollar, euro and renminbi/yen), but clearly they would have to float more freely against each other. Nor would such a system avoid the possibility of excessive capital flows, based on misguided optimism about one currency bloc or another, leading to disruptive exchange rate changes and associated international resource misallocations." (page 151).

 

13 June 2005. Book review of the book about the "Copenhagen Consensus" project from "The Hindu - India's online newspaper": "Economists may have some answers... but not all "

The book, "GLOBAL CRISES, GLOBAL SOLUTIONS : Bjorn Lomborg — Editor; Cambridge University Press" has a section on "financial instability" by Professor Barry Eichengreen of Stanford.

The review states:

"In his chapter on financial instability, Barry Eichengreen considered four proposals: re-imposing capital controls, re-regulating domestic financial markets, creating a single world currency and pursuing a solution to the currency mismatch problem wherein international financial institutions borrow and lend in emerging market currencies. The first two he dismisses as cost-ineffective, the third as desirable but politically unfeasible, and the fourth as the one most likely to succeed. The panel, however, felt the "uncertainties" and "complexities" in the field were too great to endorse any of these proposals. If Nobel laureates could not make up their minds, one wonders what lay bureaucrats and politicians are expected to do."

[emphasis added here in bold]

[To read Professor Barry Eichengreen's entire submission for the Copenhagen Consensus project, see "Financial Instability".  After noting the benefits of a single global currency, he states, "Thus, the lack of a mechanism for political accountability is a serious obstacle to the creation of a single world currency.  This is why many obervres regard this option as politically unrealistic over the timeframe relevant for practical policy making." (page 30)

 

12 June 2005. From the Khaleej Times, a good summary of the work of the GCC (Gulf Cooperation Council), including plans for the 2010 Monetary Union:  "GCC member states need to decide on common currency"

Of the common currency, the article said:

    The formation of the monetary union (MU) itself has both benefits and costs. On the one hand, benefits are mainly presented by the attractive characteristics of the new unified GCC market. The MU would result in a reduction in foreign exchange transaction costs, eliminate exchange rate risk, promote pricing transparency and, consequently, increase competition, thus fostering trade, investment and growth. At micro level, the single currency would have a long-term impact on major regional banks by encouraging more efficient use of cash. The costs of hedging against exchange rate volatility would be reduced.

    The GCC MU would lead to the formation of the largest and most liquid capital market in the Middle East. Portfolio managers and private investors would be able to invest in the region without any fear of additional currency risk. On the other hand, costs of the GCC MU are expressed by the loss of national sovereignty due to relinquishing of independent control over domestic monetary, fiscal and exchange rate policies. There also might be possible net loss in income due to lack of ability to pursue expansionary monetary and fiscal policy during periods of falling oil prices.

    Furthermore, the GCC MU would involve arbitrary restrictions on national budgetary policies, which could be interpreted as a breach on member countries' control over their individual taxation and public spending programs. Nevertheless, such costs are not of much significance when considering the benefits generated by the formation of MU. The GCC countries decided to take necessary actions to form a Gulf Monetary Union (GMU) by 2010. They already have similarities that reinforce this union.

From the economic side, oil exports are the major source of government revenue for these countries. GCC governments emphasize the importance of the diversification of their economies to spur economic performance. Unfortunately, despite members' efforts to align their economic policies over the past years, a large gap still exists among members, mainly in public debt and budget deficits. In addition to what mentioned above, the six countries are neighbors with common borders. More important, the majority of their citizens has the same religion, language and traditions.

    An important issue is addressing to which currency is the GMU going to peg its new currency given that all GCC currencies are pegged to the dollar. The single Gulf currency is argued to either be pegged to the dollar or to a basket of world's leading currencies including dollar and euro.

    Another possibility could be not pegging the currency to any other currencies at all, thus making it float. This last option might be the best choice to reflect market values and be independent in policy making and to avoid being highly affected by the negative performance of other currencies.

 

6 June 2005.  Fiji Times publishes interpretation of EU Constitution votes, by Prof. T.K. Jayaraman (also a presenter at the upcoming 2d Annual Single Global Currency Conference): "Lessons from the EU"

   Of the euro, he wrote:

"The EU and the emergence of the single currency for 13 states in 1999 stands testimony to a great marvel of the new Millennium."

 

5 June 2005.  The New York Times Magazine published an article, "Believing (and Believing and Believing) in Bullion" by Stephen Metcalf

     The article described the world's continuing fascination with gold as a reserve for currencies.  In response, morrison bonpasse of the Single Global Currency Association wrote the following letter:

"To the Editor:

    As the world moves inexorably toward a single global currency, and the sooner the better, gold will likely become less relevant as a reserve for the monetary system.  Instead, units of money used worldwide will become more like units of measurement, (e.g. meters, liters, grams) accepted by all.

    With a single global currency, there will be no fear of national currency crises, nor imbalances of payments, nor currency speculation, nor national manipulation of currency values.   The euro, and the currencies of other monetary unions, have shown the way to the single global currency.  What's needed now is a Bretton Woods-like global financial conference which sets the goal of a single global currency and the timely benchmarks toward implementation.  Why wait for a major currency crisis to show the way?"

 

2 June 2005 (but originally posted on the web on 23 August 2004)  Nouriel Roubini responds to Martin Wolf's article (see 8 August 2004, below) with blog on his website: "A Single Global Currency? Not Any Time Soon Nor in the Long Run in Which We Are All Dead"

In summary, Roubini wrote:

  In summary, not only is the likelihood that we will see a single global currency in our lifetimes slim; it is also a bad idea to begin with. It is still possible that, in 20 to 30 years, the number of national currencies may be significant smaller. If, and that is a big if, the Euro/EMU experiment is successful, most of an integrated greater Europe would eventually be under a single currency. In the Americas, a few more countries (on top of the recently dollarized Ecuador and El Salvador) may also decide to unilaterally dollarize. A NAMU (North American Monetary Union) including the USA, Canada and Mexico would make some economic sense but it is politically unlikely to come alive. So, the process of monetary unification in the Americas will be slow at best and based on unilateral dollarizations rather than formal Monetary Unions as in the EMU. ....

  Thus, while it is not far fetched to believe that in 30 plus or so years, there may be three broad currency blocs with the world, one in the Americas anchored around the US dollar, one in Eurasia anchored around the Euro and one on Asia anchored around the Yen or the Yuan, we could expect, at most three global currencies in our lifetimes, certainly not a single global currency. And even this process towards three main global currencies is likely to be bumpy and highly uncertain: unilateral dollarizations in the Americas may have little appeal to most Latin economies if they do not imply a road to a symmetric monetary union, an idea that is a politically toxic in the US. In Europe, the EMU has still to prove itself before it can become the currency of all the EU 15, now 25 and soon 30-40 plus members. And in Asia, monetary and currency stability may depend on the resolution of the question of who will be the political and economic hegemon of the region: Japan, now China, or maybe India in some future?

  So, for the time being a single global currency in the next two decades? Not a fat chance of that happening and/or being desirable!

 

 

30 May 2005.  Nobel Laureate Robert Mundell intended to deliver a speech in Beijing entitled, "Reason for a World Currency", but, in response to the needs of the day, changed it into "A Great Debate on the Exchange Rate of RMB".  See "Setting limits on China's textiles not in US-EU interests"  (from the Peoples Daily Online)

 

24 May 2005.  "Euro zone may catch dollar deficit disease"   (from Reuters)

Excerpts of the article...

LONDON (Reuters) - Budget and current account deficits have ravaged the dollar in recent times, but they may pose a more damaging long-term threat to the euro....

   The euro zone's current account balance is already flirting with a shortfall. After posting a deficit of 7.9 billion euros in March, the first quarter 2005 balance showed a slim surplus of 8 billion....

    Ratings agency Standard & Poor's warned earlier this year rising healthcare and pension costs could push sovereign ratings on rich nations including France and Germany to junk status in 30 years unless they tighten their fiscal belts.

   "But the euro zone governments can't respond by printing more money, expand money supply and monetise the debt because they don't have their own currencies," Pearson said.

  "They have a common currency controlled by the ECB (European Central Bank). The last resort that sustains sovereign, domestic currency debt ratings in almost all eventualities is not there."

[Interesting short glimpses at the perceived effects of national fiscal problems on the value of a common currency.  The reference to Standard & Poors shows how national indebtedness can affect debt ratings, but the effect on common currency value is still uncertain.   SGCA]

 

24 May 2005.  "Trichet sees 'relatively moderate' euro zone growth in 2005 and 2006 UPDATE"  (from Forbes.com)

Excerpts of the article...

   BRUSSELS (AFX) - European Central Bank president Jean-Claude Trichet said he expects the euro zone to post 'relatively moderate' economic growth this year and next....

   He said all euro zone countries are benefiting from monetary union, including Germany.

   On Friday, German Economy Minister Wolfgang Clement said his country's economy has become an unwitting 'victim' of the ECB, whose inflation-focused monetary policy has contributed to a dampening of growth.

   But Trichet said all euro zone countries, including Germany, are enjoying the lowest level of interest rates that they have experienced since World War II.

24 May 2005.  "Portuguese Deficit to Reach 6.8% of GDP This Year"  (by Jeffrey Lewis, Bloomberg.com)

Excerpts of the article...

   "May 23 (Bloomberg) -- Portugal will have the highest budget deficit of any country using the euro since the common currency was introduced in 1999, the government said today....

   Portugal was the first country to admit breaching the EU deficit limit in 2001. France and Germany have gone over the limit every year since 2002, and the EU's statistics office said today that Italy did so in 2003 and 2004.

   Changing Rules

   Germany, Italy and Greece are also expected to join Portugal in exceeding the deficit limit this year, according to the European Commission.

   Germany and France, the euro area's two biggest economies, in March convinced European finance ministers to loosen the budget rules in certain circumstances that, not coincidentally, affect them."

[A key question remains for supporters of the single global currency, and, in the interim, regional monetary unions: Do political restraints on government fiscal deficits have any real effect on the value on the common currency?  Aren't market forces, which consider total indebtedness and other economic factors, sufficient to deal with the costs of government borrowing? SGCA]

  

23 May 2005.  "GCC monetary union slow progress" (from ameinfo.com, UAE)

    "GCC central banks should be prepared to give up some of their monetary powers to a common monetary authority to make the single currency a success, Central Bank of Kuwait Governor Sheikh Salem Abdulaziz Al Sabah told Kuwaiti daily Al Watan. He said that GCC states have made only modest progress towards laying the ground for a planned single currency by 2010."

 

7 May 2005  "Economic ‘integration of Asia is new key priority’ for ADB"  (from the Gulf Times, Qatar)

Excerpts of the article...

    ISTANBUL: The president of the Asian Development Bank (ADB) closed the organisation's annual conference in Istanbul yesterday with a warning that further economic integration of Asia was essential.
    ADB president Haruhiko Kuroda said that despite rapid economic growth in the region, small and medium-sized countries risk being left behind unless their economies are integrated with Asia's giants....

   Analysts at the conference said, however, that integration would take time and options like a European-style common currency and single market were still very far off.

2 May 2005.  Cyprus, Latvia and Malta join ERM2 (Exchange Rate Mechanism), a key step toward adoption of the euro.  See "Cyprus Takes Big Step towards Joining Euro Zone" in GreekNews, a Greek-American newspaper.

The article, in its entirety...

     Brussels.- Cyprus, Latvia and Malta on Friday joined the Exchange Rate Mechanism (ERM-2), the waiting room for the euro. They have to spend at least two years in the ERM-2 currency regime to show their currencies are stable against the euro within a +/-15 percent band around a fixed parity rate. To adopt the euro they also have to meet criteria on long term interest rate convergence, inflation, public debt and budget deficits as a ratio.

   This, together with the signing of EU accession treaties by Romania and Bulgaria on Monday, is a signal EU integration was moving ahead despite growing market concern about the bloc's ability to organize itself, economists said.

"If we can enlarge the Economic and Monetary Union in the present situation, it's a signal that things are going well," said Lars Christensen, senior analyst at Danske Bank.

 

2 May 2005  Single Global Curency Association responds in Letter to the South China Morning Post to Chief Executive Tsang's comments (See 24 April, below) about an Asian common currency:  "Single Global Currency":

Regarding Chief Executive Tsang's call for an Asian common currency and Jonathan Ishaque's 28 April response, may I suggest that THE answer to the world's currency problems is the Single Global Currency.  If the Europeans can plan and implement a currency within 30 years, why cannot their example be copied by the world in another 20?  The Asian common currency would be an excellent interim step, but the real goal should be a Single Global Currency.

   With a Single Global Currency, the world will save hundreds of billions of dollars/euros annually in avoided transaction costs. (Do the math at one-half percent with $1.8 Trillion traded daily.)  In addition, the world will avoid the risk of currency failures, and the often-cited and bemoaned current account/balance of payments problem.  Do France and Germany now have a Balance of Payments problem?

   Contrary to Mr. Ishaque's view, the Single Global Currency need not be preceded by trade agreements, nor be accompanied by any particular fiscal policy.  With a Single Global Currency, wealth and povery will still co-exist, although having that single currency will assist worldwide comparisons.  Societies and governments will still have to deal with economic growth and disparity. 

   The Single Global Currency Association, www.singleglobalcurrency.org, was established in 2003 to move the world toward that goal, and is hosting the Second Annual Single Global Currency Conference at Bretton Woods, New Hampshire this July 14.

 Sincerely yours,

 morrison bonpasse

President

Single Global Currency Association

Newcastle, ME USA

 

4 May 2005.  Financial Times editorial with good discussion of the dynamics within a currency union: "A currency union needs markets"

Excerpted paragraphs:

    Is it possible to have a monetary union without a political union? This remains a question without a definitive answer. But there is another, more immediate concern. It is whether a currency union can work in countries without a flexible market economy. On this, current European rhetoric and performance begin to raise disturbing doubts....

  Since the launch of the monetary union, Italy's economy has grown almost as slowly as Germany's. But it has failed to use this period to improve its relative position. The government has wasted its opportunities, at least from the point of view of the country if not from that of the prime minister.

    In the old days, Italy would have escaped its trap by devaluing the lira. But those days are gone. What is now required, instead, are years of low inflation and improving competitiveness. Confronted with such a prospect, populist politicians will, inevitably, be tempted by fiscal profligacy. With the credibility of the eurozone's fiscal rules in tatters, that temptation can only grow. Hitherto, markets have treated the debt of member states as if they were almost perfect substitutes. But differences in debt burdens and growth prospects may well call that assumption into question. A failure to ratify the constitution would only reinforce this dangerous tendency.

    Eurozone politicians must explain that a monetary union is not a way to escape the market, but makes responsiveness to market forces even more urgent. The German private sector is equipping the country to cope with the challenges ahead. The same, alas, is far less true of the German government. But it is altogether untrue of Italy's. The only hope for future success is acceleration of market-oriented reforms. Rigid economies will put huge pressure on the monetary union itself. What is at stake in the eurozone's big countries is too important to permit such infantile populism.

 

30 April 2005.  "Asia finance chiefs meet at ADB amid yuan talk" JP Morgan economist predicts monetary unon. 

from Pakistan Times.

   LONDON: Finance officials from Asia, which has two-thirds of the  world's foreign exchange reserves, meet next week as speculation reaches fever pitch about a Chinese currency revaluation that could rock global markets.

   Asian finance ministers and central bank officials will attend the annual Asian Development Bank meeting in Istanbul to discuss the economic outlook, the risks they face and ways to prevent a repetition of the 1997/98 Asian financial crisis.

   Asian central banks have more than $2.5 trillion of reserve assets, an arsenal that has grown rapidly in recent years as they intervened in markets to curb the export-damaging rise of their currencies against the falling dollar. ...

   “It is in their self interest that Asian economies which have some kind of dollar standard move to a more flexible regional arrangement,” said David Fernandez, head of Asian economic and sovereign credit research at JPMorgan in Singapore. “I am a big believer that we are on a path that will take us to cooperative monetary union in Asia.” ...

28 April 2005.  John Nash, Nobel Prize winner, discusses global currencies: "Nobel winner Nash critiques economic theory"

Exerpts from a talk at Brown University, from the Brown Daily Herald.   

Nash's lecture, "Ideal Money and Asymptotically Ideal Money," centered on the connection between fluctuation in inflation and exchange rates and the perceived long-term value of money.

  "Good money," he argued, is money that is expected to maintain its value over time. "Bad money" is expected to lose value over time, as under conditions of inflation.

  .... He proposed that international exchange rates be fixed by pegging the value of each currency to a standardized basket of commodities, called the "industrial consumption price index." Such a policy would curtail the ability of central banks to make monetary policy.

   ....Nash said his system would be more stable and sustainable than the gold standard because exchange rates would not be seriously affected by fluctuations in any one commodity.

   ....Nash responded with caution to the suggestion from an audience member that a system of currencies approaching perfect stability would ultimately produce a system with only one world currency.

   "There's nothing wrong with it," Nash said. But he added, "In practice, I'm a little distrustful of the politicians at the level of the United Nations and elsewhere," who would be in charge of administering a world currency.

 

 

24 April 2005.  Acting Hong Kong Chief Executive, Donald Tsang, talks about Single Asian Currency: "Single Asian currency key to stability"

In excerpts of his speech, he said:

   "....Should there be a single Asian currency?

Before we answer this question, we need to ask: Why do we need a single currency? 

     Single Asian currency can facilitate unity

The simple answer is that if there is a sense of Asian unity, then a single Asian currency can either facilitate that Asian unity or become a common means towards that end....

50 years to achieve a single currency

    Second, Asia is unlike Europe that needed a single currency as part of a political union, and Europe has worked towards political and economic integration for over 50 years before the birth of a single European currency in 2001.

    Even with common objectives, it took half a century to achieve a single currency.

    Third, the rise of the Euro has created a serious alternative to the US dollar, and it is not currently clear whether there is room for a third global currency.

    We must not forget that the Europeans experimented with different currency arrangements, such as the snake or crawling peg, which were subject to many speculative attacks before the Euro was successfully launched.

   Can Asian unity and common understanding withstand such speculative attacks against Asian currencies during this transition?

    Fourth, a single common currency requires deep and robust financial systems and markets, including strong institutional support.

    Asia has just recovered from a crisis of global proportions, in which many domestic weaknesses in our financial systems have been exposed. Is our institutional and market base ready for the launch of such an important and strategic initiative?

    All these are serious questions, requiring serious answers before the way forward is clear. 

    But the benefits of globalisation and Asian economic integration are clearly strong incentives for us to think about whether we should work towards a single Asian currency."

 

14 April 2005.  "East African currency coming"  (News24.com - South Africa)

The article begins:   

"Nairobi - Kenya is pushing ahead with plans for an East African political federation with neighbouring Tanzania and Uganda that would create a common currency and constitution for the three nations by 2010.

Taking the lead on the project, President Mwai Kibaki's government announced late on Wednesday it would take the proposal to the Kenyan public in a bid to win support for expanding a three-way customs union that took effect in January...."

 

14 April 2005.  "Asian bank will issue bonds in local currencies to help markets"  (Financial Times)

Two excerpted paragraphs:

     "The Asian Development Bank will soon issue local currency bonds in Thai baht and Philippine pesos, and a further Malaysian ringgit bond, as part of its drive to promote Asian bond markets, Haruhiko Kuroda, ADB president, said in an interview yesterday. ...

     Mr Kuroda, previously a senior official at the Japanese finance ministry, took over as head of the ADB this year and is eager to push forward financial and economic integration in east Asia.

     Asian finance officials accept that economic disparities between rich and poor nations, as well as a recent upsurge of nationalist feeling in Japan, China and South Korea, make any kind of monetary union impossible in the foreseeable future. Less ambitious forms of financial co-operation and integration, however, have made steady progress....."

 

12 April 2005.  International Herald Tribune.  "The Chinese-Japanese cold war" by William Pesek, Jr. Bloomberg News.

... Cooperation has never been more vital. Asians still ship vast amounts of savings - funds that could be used at home on roads, schools and stimulating entrepreneurship - to the United States, where it is parked in Treasuries. The arrangement keeps U.S. borrowing costs low, though it's not clear how much Asia gets in return, other than slightly cheaper exports.

  Japan, China and South Korea should be mulling ways to bring that money back home. They need to step up efforts to develop Asian bond markets, reduce trade barriers and adopt a common currency....  (emphasis added)

 

10 April 2005.  "Countdown to Monetary Union"

(Allafrica.com)

The article begins:

   IN three months' time the West African Monetary Zone (WAMZ) will launch its monetary union with the commencement of operations of the West African Central Bank (WACB). The West African Monetary Institute (WAMI) is therefore expected in April (this month) to make final assessment of the member countries' readiness for the monetary union....

 

9 April 2005.  Business Week:  "Inflation in Ireland falls to 2.1 percent"

The article begins:

    "APR. 8 8:10 A.M. ET Annual inflation in Ireland fell last month to 2.1 percent, nearly in line with the European average, the government's Central Statistics Office reported Friday.

    The slight drop from February's rate of 2.2 percent reflected actual price drops for many categories of goods in the Republic of Ireland, one of a dozen countries using the euro common currency. Inflation across the euro-zone averages 1.9 percent."

5 April 2005.  Paktribune.com  "ACD wants common currency, liberal trade"

   " ISLAMABAD: The Asian countries have stressed the need for introducing a common Asian currency, constituting a monitory fund, and liberalizing Asian bonds market and trade.

    At the opening of the High Level Expert Seminar on 'Economic Cooperation in Asia' here in Islamabad on Tuesday, the representatives of Asian countries termed political disputes the biggest irritant in region's economic development and sought any early solution to them for economic progress and stability of entire Asia.

In his address to the gathering as keynote speaker, Khurshid Mehmood Kasuri, the foreign minister, said the emergence of the ACD was a region-wide process reflecting our common desire of self-reliance, consolidation and of building a partnership from the individual strengths of each of Asian states."

 

24 March 2005. U.S., Canada and Mexico Summit.  "North American leaders reach broad agreement on continental co-operation."

   For the Single Global Currency Assn, the news of the conference was what they did NOT discuss:  "[Prime Minister Paul] Martin disputed concerns from critics that the plan would lead to a European Union-style integration with a common currency and customs union."

 

20 March 2005  "EU Clears Hurdle on Euro Stability Reform "  (CBS News)

  The article begins:

(AP)  European Union finance ministers cleared a major hurdle Sunday in efforts to reform the rules underpinning the stability of the euro, meeting German and French demands for room to spend their way out of economic problems, officials said.

   They reported a deal to ease the "Stability and Growth Pact," while retaining its key requirement that a euro-zone nation's annual budget deficit cannot exceed 3 percent of gross domestic product.

   The agreement ended five months of tortuous negotiations during which Germany and France led demands that the stability rules be interpreted less strictly by the European Commission to giving governments space to stoke growth by increasing public spending.

15 March 2005  "Should markets care about the EU budget pact?" (by Jeremy Gaunt)

LONDON (Reuters) - Call it deficit attention disorder.

Financial markets are taking scant notice of the European Union's struggle to revamp its budget rules, dismissing the risk of a fiscal crisis that could rattle ratings, ham