A Single Global Currency?

Why not? But only if it's gold and silver bullion! - Part 1

1. Reinventing the Wheel
2. The Advantages of Bullion As Global Currency
3. The 'Medium and the Message'
4. No Competition Means Inflation
5. Human Integrity versus "CYA"
6. Gold Bullion Is Self-Regulating
7. Why Fiats Can Even Exist
8. The Bottom Line
(Part 2)


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.

The plan is to bring about the institution of a single global currency (SGC) by the year 2024. Last year's meeting had only seven attendees and three temporary hotel guest spectators who drifted in for a few minutes. The effort may never amount to anything, of course - but who knows? Just in case it does, I want to add my two cents worth to the discussion by bringing up some points that have been largely sidestepped and ignored, so far, by the vast majority of those who have seriously considered such a currency.

It is especially important for free market advocates and gold investors to understand what the implications will be if such a currency should turn out to be of the central bank-issued, debt-based fiat variety - which is probably the most likely scenario. Given the current level of understanding (or lack thereof) of the majority of people of what it actually is that they are earning, spending, saving, and investing every day of their lives, the fact that any future global currency will be just another fiat is a forgone conclusion.

However, how would you have liked to be a fly on the wall at the original Bretton Woods conference? Better yet, what if you could have had a say in what was being formulated there, right over the heads of everyone, as was to be expected?

The best way of influencing an area of public discourse is at its very inception, when organizers, supporters, and participants aren't quite sure yet in which direction their project will take off - or whether it will take off. When human arrogance hasn't made the principals "fat" with a sense of recognition, achievement, and self-importance, yet.

If - and this is a really big "if" - this organization should ever rise to the level of influence it desires, "getting in" to the discussion now, and contributing to its future direction, can be an invaluable opportunity - one that is not likely to appear again anytime soon.

It is an opportunity any self-avowed free-marketeer should take seriously!

Although two presenters at the 2004 conference, James Turk and Prof. Choudhoury of the College of Commerce and Economics, Sultan Qaboos Univ., Muscat, Oman, have weighed in on the side of gold, I have no idea whether this organization will post contributions like this one, or submit them to its participating experts for consideration, or whatever. But I do know that all those who currently shake their fists and rail at government interference with the ordinary free market process had better get up and do something about it. Wringing your hands but doing nothing are very compatible - but utterly fruitless endeavors. They get us results like the US supreme court's recent Kelo decision, the Real ID Act, or the Patriot Act - the grandfather of all post 9-11 freedom-destroying legislative coups-d'etat.

Publicly, big-wig economists and central bankers still profess scepticism toward the utility or even feasibility of an SGC - but you and I know that they are working on it in the background. To them, it's better that way. Too much public attention to this issue early on could be fatal. According to a Zogby poll conducted by the organization in question, a majority of individuals are still opposed to the very idea of it, although the numbers are getting a little too close for comfort. It is easy to see that in five, ten, or twenty years this can change dramatically.

The time to weigh in on the side of free markets and individual property rights is now.

This essay, in order to encourage everyone to follow and weigh in on the discussion - and not leave it just to the pointy-headed intellectuals and academics out there - is written in very common terms and seeks to avoid the typical ecommunist (I'm sorry, economist) mumbo-jumbo at every turn.

Reinventing the Wheel

There is a certain amount of futility to an undertaking like the "single global currency" because a global currency that can equalize exchange rates, avoid exchange related transactional expenses, and that can put the global economy on a sound and stable footing need not be created at all. It already exists.

My reason for coming here is to be an advocate not for the creation of that currency, but for its widespread adoption and acceptance by people - not by governments.

The currency I am talking about is not the dollar, not the euro, not the yen, the renminbi, or the peso.

It is gold (and silver, to some degree).

There are an almost endless number of reasons why gold is the best choice for a global currency, but all of those can be distilled into only three:

The Advantages of Gold Bullion As a Global Currency

  1. The first reason for choosing gold as the most useful, most stable, and most efficient solution to the world's currency woes is the fact that its ownership can now be traded and exchanged and transferred instantly, legally, and efficiently around the world by the click of a mouse. This completely avoids the usual charges that gold is "too heavy" and "too cumbersome" - and "too antiquated of a relic" to be useful in modern society.

  2. The second reason is that the argument that "gold can never play a role as a true currency again" (because the amount of outstanding paper currency that would represent claims to gold if it was reintroduced is just too large these days) is completely misplaced and does not even enter into consideration, as I will explain below.

  3. The third reason is that, with gold, Marshall McLuhan's suggestion that "the medium is the message" becomes reality - although admittedly in a sense that he never imagined.

The "Medium and the Message"

In commercial transaction, currency is the medium, and the "message" it transfers is value. So, currency is the medium by which people choose to transfer value from a buyer to a seller of goods or services. But in the case of gold, the currency is no longer just the medium or the conduit of value. It is value itself.

This gives the utility of gold as currency so high and so lofty an advantage over fiat that fiat could never hope to rise to that same level.

The trouble with fiats is that their value must be supplied from the outside. They have none of their own. That is why they are incapable of effectively and efficiently holding value over long periods of time. Their value is always dependent on an expressed or implied "promise," and that promise can only be kept by government action of one sort or another.

If fiat is dependent in its value (or its utility to individuals and organizations) on governments, that unfortunately means that governments are in control of its value. That control opens fiat up to potential government abuse. To put it bluntly, governments have the ability (and as we will see the motive) to deceive populations about pretty much everything that has to do with fiats.

The most important factor in that equation is that governments can deceive populations about the amount of fiat outstanding. Since they determine the amount of fiat to be created over time, the potential of over-issuance (monetary inflation leading to price inflation) is theoretically unlimited under any fiat regime.

In current practice, due to the innate competition between currency-issuing nations, there are certain practical limits to this threat of over-issuance. Governments must take care to prevent their populations (and, in our globalizing world, those in other countries) from completely losing faith in their respective national fiat. Even though there may be exchange risks and costs, this natural competition at least reduces the possibility of utter debauchery.

No Competition Among Fiats Means
No Limits on Over-Issuance

But when a fiat - any fiat - becomes the only fiat in the world, with only one institution backing it up, all natural checks and balances due to international competition are abandoned. When that happens, the threat of over issuance "graduates" from a limited theoretical possibility to an unlimited practical one.

A single global fiat requires a single central bank that issues it. A global central bank, in turn, requires the force of law to stand behind it, and that law can only be enforced by a centralized political entity with executive powers. A global, centralized, political entity will by nature require a global "police force" that can enforce its laws, and that global police force cannot tolerate competition - lest it lose control.

Such a concentration of power in one global institution or group of institutions is a recipe for disaster, because any institution must be manned by humans, and humans are prone to failure and temptations, as history has amply shown.

One might argue that Europe is probably the best example, and proof, that this caution is overdone, that a single currency used among widely disparate nations is possible without utter tyranny - but Europe as a political entity is still young. A drive for an over-arching European military force is already in progress. There is no telling where this will lead at this time - but I have a good guess. If that pan-European military ever comes into existence - and possibly even merges with Russia's - watch what happens to any country trying to secede from that "Union." Americans have a perfect historical example of all the evil that will be unleashed on such a country or group of countries making such an attempt.

But, however that may be, if fiat issuance is ever globalized and directed by a single entity, whether a central bank or a government or (more likely) a combination of both, there would be no one left with the ability to enforce an accounting to the people.

Human Integrity Versus "CYA" (Cover Your Arse)

It matters not how perfect such an entity may be structured or organized to ensure that such abuses will never take place. We all know that organizations are always run by humans, and humans are - well ... fallible. There is no disputing that fact.

Give a human more power, and you also give him or her more power to cover up the human's mistakes.

As long as humans will make decisions in banking or government, mistakes will be made - and covered up. The bigger the mistakes, the more power is used to cover them up. History has shown that people in high places develop an amazing ability to "cooperate" when it comes to covering up mistakes that could negatively affect the entire power structure.

That, combined with the fact that an individual's power to decide for himself how he will live is directly inversely proportional to the degree of centralization of political and financial power, counsels heavily against even trying to establish a global fiat system - at least if you like your freedom.

Bullion Is Self-Regulating

All of these potential evils become non-issues, however, when gold or silver specie alone become the global currency of choice.

In an ideal world, specie and fiat could peacefully coexist and compete with each other. The only problem lies in the fact that any national or even international fiat would be no match at all to a freely circulating specie currency of the type I am proposing.

In a world where you have the ability to not only take some of your fiat and buy and own gold as you do now, but where you can actually get paid in specie for your work/business activities, where you can go to any store, online and offline, and buy whatever you want for specie, priced in nothing but bullion-weight units, who in their right mind would want to accept and hold shaky and unpredictable fiat instead?

Why Fiat Currencies Can Even Exist

There are only two fundamental reasons why fiat has become so all-pervasive:

A. Under the old "classical" gold standard, people became used to regarding the circulating paper-proxies for gold as currency themselves, and

B. People were already mentally conditioned to count and value their wealth in terms of arbitrary currency units such as "dollars," "guineas," "francs," etc.

But more on that later.

Absent the abolition of laws, regulations, or court decisions that restrict specie-use as a currency, all that needs to be introduced is (a) a universal dual pricing system that prices every item or service in specie-weight units as well as in fiat units, that is (b) combined with an universal, convenient, facility for acquiring bullion currency.

Once these two conditions are met,

a. Shoppers will be able to see every day how the fiat price of something goes up while the gold price stays the same or even gets deeply discounted (after all, merchants might prefer to earn stable gold rather than shifty fiat units, so they might price their wares accordingly).

b. Workers will eventually demand specie as wages from their employers to reduce their individual exchange risks.

c. Companies will demand specie from those they sell to (because specie eliminates all currency risk) in domestic as well as international trade, and finally

d. Governments will demand specie from their citizens for tax payments - or they will try to outlaw bullion currency. But as long as there are sovereign, independent nations, this can be minimized or avoided altogether.

The Bottom Line:

The bottom line is:

I. Accepting and holding fiat is only an option when the free acquisition and circulation of specie as currency is somehow restricted, either by law, by custom, or by the fact that everything in the world is priced in fiat units rather than bullion-weight units.

II. The fact that people have "learned" (were trained?) to think of all commercial value in terms of arbitrary fiat units is the sine qua non that has allowed a pure fiat system to exist for as long as the current system has.

III. It is this very fact that - if changed - can usher in a period of worldwide prosperity, individual security, stability, and quality of life for individuals in all nations that will be without equal in world history.

As a result, a global bullion weight system has the following advantages:

Yes, gold can be stolen - but so can fiat. (Let's not talk about such Orwellian theft-prevention measures as implanted RFID chips, etc., for the moment. Yes, they can be used to transfer ownership of gold as well as fiat, but the fallibility of human nature that leads to government abuses in fiat issuance counsels strongly against the introduction of such devices, even if they were to facilitate a gold currency instead of fiat. Transfers of physical gold units must never be limited or outlawed in any form, for any reason.)

(To read the rest of this essay and the footnotes, please follow this link.)

Got gold?

Alex Wallenwein
Editor, Publisher
In this multi-decade gold bull market, the old investment maxim of "know when to buy and when to sell" has been replaced by "know when NOT to sell!" Euro vs. Dollar & Gold Monitor subscribers know when not to sell.