Introduction
"Perhaps the sentiments contained in the following pages are not yet sufficiently fashionable to procure them general favor; a long habit of not thinking a thing wrong gives it a superficial appearance of being right and raises at first a formidable outcry in defence of custom. But the tumult soon subsides. Time makes more converts than reason." Thomas Paine in Common Sense. [1]
The size and endurance of the world’s multicurrency foreign exchange system gives it the superficial appearance of being " right, " but it’s more obsolete than " wrong " and will increasingly be subjected to the "reasons" for replacing it with a Single Global Currency. The major questions are the timing and stability of the implementation.
The word play in "Common Cents" in the second part of the title, "Common Cents for the World," arose from an email exchange with Michael Federle, Group Publisher of Fortune magazine. In his response to an email, Mike wrote on 27 April 2005 that a Single Global Currency "makes all the sense in the world." Seeing the opportunity for a pun, I responded, "Indeed it does. Makes all the cents in the world, too." After that, I used the punned form of "cents" a few times and then coined the slogan, "Common Cents for the World." [Of course, as with most ideas, this was not the first such use of the punned phrase. Google later reported 115,000 "results" for "Common Cents" of which two came from the Single Global Currency Association website.] Thomas Paine, author in 1776 of the original Common Sense, perhaps would be pleased with the pun and with the common sense goal of a Single Global Currency–with common cents. It made no sense to him for the American colonies to be governed, without representation, by England, and it makes no cents/sense for the world not to have a Single Global Currency–soon.
"Cents" are actually closer to a Single Global Currency as a word, as that is the term which denominates the coins of fifteen currencies, including those of the European Monetary Union, Singapore/Brunei and the United States. [2] Thus "cents" are already denominated in countries whose GDP totals comprise about 50 percent of the world’s total.
The 2,500 year solution : Approximately in the sixth century B.C. people began foreign exchange trading of the increasingly standardized coins of the Western, Indian and Chinese civilizations. Foreign exchange became the fifth wheel of human transactions, accompanying the first four of labor, raw materials, money and energy. For most of those 2,500 years, the multicurrency foreign exchange system seemed to be more of a solution than a problem, and we became accustomed to it.
Two central problems arose in foreign exchange trading:
-What is the value of one coin/currency compared to
another, and
-What makes the value of one currency rise or fall
compared to the others?
Over the next two-and-a-half millenia, the value of traditional foreign exchange trading has grown to $2.5 trillion per day, and traders and economists continue to struggle with those two basic questions. The answers remain elusive. There are thousands of academic articles, and hundreds of books, written by economists about these questions, but none solves either question. None has pulled the Arthurian sword from the economics Rosetta Stone. [3] Through all the analysis, we know a lot more about many aspects and implications of the multicurrency foreign exchange system, but no one consistently knows the values of currencies nor can predict their ups and downs.
Like the banned pesticide, DDT, the multicurrency foreign exchange trading system was developed to solve a problem–people wanting to trade goods and services which were valued using two different currencies. Like the makers of DDT who responded to the need to kill inconvenient insects, the traders of foreign exchange improved the service so as to efficiently enable the vast increase in convenient trading; but the two questions were never solved. Instead, like DDT, the larger and better foreign exchange trading system has become more hazardous and can bring harm to people and economies as values of currencies go up and down with large, unpredictable variations. The most recent example of such movements is the seesaw relationship of the US dollar and the euro, the currencies of the two largest, most stable economies in the world. After being introduced on 1 January 1999 at the value of $1.17 ($1.16692), [4] the euro descended to its $.83 low against the dollar in October 2000. Then, it increased in value a full 64 percent to its high of $1.36 in December 2004. After such volatility, the value of the euro returned to $1.17 in November 2005, and has remained in that range ever since.
The multicurrency foreign exchange trading system will never solve the two problems of valuation and value fluctuations and, like DDT, it must be replaced with something better. The Single Global Currency is the common cents/sense solution. It does not merely answer the two foreign exchange questions; it eliminates them.
This book is intended for worldwide readership by people who understand that the world uses multiple currencies, and that the valuations of those currencies, and the relationships among them, cause recurring problems. It’s for those who have observed recurring currency crises and see the risk of more to come, and worse. It’s for those who see continuing problems with global imbalances of payments and no reasonable solution in sight. It’s for those who would say and ask, like Robert F. Kennedy, "I dream things that never were and say, Why not?" [5]
This book could have been titled Single Global Currency for Dummies to be consistent with the tongue-in-cheek book series which brings simplicity to complex issues. Aside from the potential trademark or copyright violation issues, such a title would have been misleading to many, as this book is for ALL the people of the world, including "dummies" with common cents/sense, and economists, too.[6]
More appropriately, if the title had not already been used by Benjamin Friedman’s, The Moral Consequences of Economic Growth , it might have been titled, The Moral Consequences of the Multicurrency Foreign Exchange System , because further delay in implementing the Single Global Currency, in the face of evidence of its benefits for the world, becomes a moral issue. If a cure for cancer were readily available, it would not be moral to delay the implementation of such a cure, while continuing further research on cures which are known to be ineffective. Similarly, in a world where vast health, housing and nutrition needs are unmet due to lack of money, it is not moral to delay the SGC implementation, while continuing to focus marginally useful research on the puzzles of the risky and costly multicurrency foreign exchange system.
There IS a moral solution to the problems of the multicurrency foreign exchange system, and it’s the Single Global Currency, within a Global Monetary Union, managed by a Global Central Bank (termed henceforth from time to time as the "3-G s ").[7] This book will enable readers to understand that solution, and to learn why it is not yet on the international radar screen with an implementation date; and what it will take to get it there. For some, it hopefully will move their understanding from "Why?" to "Why Not?"
Others will ask, "What does this mean to me?" The short answer is that the life of almost every human being on the earth will be improved by the implementation of the Single Global Currency, just as those lives are currently diminished by the unpredictable, risky multicurrency foreign exchange system. The most direct effect of the Single Global Currency will be the elimination of currency transaction charges for international purchases and sales, for an annual saving of about $400 billion. The removal of such charges, if passed on to consumers, will lead to a reduction in the price of internationally traded goods and services.
Dwarfing that benefit will be the opportunity to achieve a one-time increase in the value of financial and other assets worldwide of $36 trillion through the lowering in interest rates and the elimination of worldwide currency risk. That increase of asset values will contribute an additional $9 trillion in world GDP, which will, in turn, become the foundation for future annual GDP increases. Assuming annual overall increases of 3 percent, that would mean approximately a $270 billion annual increase. When added to the $400 billion in transaction cost savings, that brings the annual benefit to $670 billion, an average of $100 for every human being, every year. To the extent that the implementation of Single Global Currency causes harm, such as unemployment for currency traders, those savings can be used to ameliorate such harm.
Even with the expectation that those benefits will be spread unequally, they still will benefit everyone on the earth at some level. Even if measurable cash does not flow into everyone’s hands, everyone will benefit from the elimination of currency crises.
On the other hand, a failure to implement a Single Global Currency may lead to currency crises, and even a worldwide currency crisis affecting the US dollar, and the loss of $trillions.
The book begins with an explanation of the current multicurrency foreign exchange world and its dangers. Chapter 4 introduces monetary unions, and Chapter 5 begins the explanation of the Single Global Currency. There are no economics formulas in this book and the only graph is a simple comparison of the fluctuating prices of US dollars and euros relative to each other. Even the two chapters specifically dedicated to the views of economists, Chapter 3 on the existing situation, and Chapter 6 on the Single Global Currency, are written for lay readers.
The race to the moon began with US President John F. Kennedy’s September 1962 proclamation at Rice University in Texas that it was to be the goal of the United States to land a human being on the moon before the end of that decade. At the time of the setting of that goal, only a maximum of seven years and three months in the future, the United States had launched only two people into orbit around the earth, beginning with John Glenn in January and Scott Carpenter in May, and neither flight lasted longer than five hours.
We are now much further along the journey to the Single Global Currency than humans were to the moon in 1962. We now know how to implement the 3-G s : a Single Global Currency (SGC) in a Global Monetary Union (GMU), with a Global Central Bank (GCB). We have considerable experience with monetary unions, crowned most recently with the euro, which took ten years to implement from the February 1992 signing of the Maastricht Treaty to the 1 January 2002 distribution of the new currency among the people of the European Eurozone.[8] On the other hand, one could argue that the process took only five years and two months from the 1 November 1993 adoption of the Treaty to the 1 January 1999 implementation of the euro on financial ledgers, but with the new cash not yet in circulation.
The size of the Single Global Currency project should not be daunting, as the Gross Domestic Product or GDP, of the Eurozone economy in 2002 was greater than the GDP of the entire world in the mid-20th century, even when adjusted for inflation. The administrative costs of implementation will be far less than those incurred by the United States when sending an astronaut to the moon, estimated to be equivalent to $131 billion in 2004 US dollars.[9]
By the time the world reaches the "3-G" goals, the multicurrency foreign exchange trading system will have had a run of 2,500 years and it will have outlived its usefulness. The book will now explore the history, operations, and problems of the multicurrency foreign exchange system, and then why and how it must be replaced.
