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Is the World Headed Toward a Single Global Currency?

Source: EcommerceTimes

Many economists, including Paul Krugman and Nouriel Roubini, have argued that the European Monetary
Union is in trouble because of the fiscal difficulties of a few of its member countries. Some have predicted that
the euro will fail.

Because the prospects for a future single global currency depend upon the continued success of the euro and the
currencies of other monetary unions, I discussed the euro with Morrison Bonpasse, president of the Single
Global Currency Association, to get his insight into this situation.

Theodore F. di Stefano (TdS): What's wrong with the euro, and why are some economists looking askance at it?

Morrison Bonpasse (MB): Very little. The problem is that it's a currency of 17 countries issued by a single
central bank, and is therefore not subject to the fiscal difficulties of the government of any one country.
However, because currency traders and others are so used to thinking that governmental fiscal problems
guarantee monetary problems, the euro has been criticized.

TdS: Why don't the problems of Greece, Ireland, and Portugal translate into problems for the euro?

MB: It's because the value of the currency depends upon the soundness of the issuing bank and the people's
confidence in that bank's stewardship. It does not depend upon the fiscal soundness of any one country. When
New York almost went bankrupt in 1975, the value of the U.S. dollar was not in jeopardy. The State of
California now has a large deficit to control, and, again, there is imperceptible risk to the dollar.

TdS: What if Greece, Ireland or Portugal goes bankrupt? Wouldn't that affect the euro?

MB: Not necessarily. If a euro member state goes bankrupt, then its creditors, or bondholders, will obtain what
they can obtain in euros, just as if the bankrupt state were a bankrupt corporation or a person. Such partial
payments would be in euros and not some inflated national currency. Of course, fiscal difficulties drive up the
required interest rates for loans to such governments, but the value of the currency should not be affected.

TdS: Why are you optimistic about the future of the euro?

MB: European countries are seeking to join, and not run away from, the euro. Estonia just became the 17th euro
zone country. Other countries are waiting to fulfill the admission criteria. It's a difficult decision for countries,
but the historic direction is clear. Over the past year the value of the euro, in dollar terms, has fluctuated
between (US)$1.20 and $1.45, and is now at $1.38. There are presently 27 European Union Countries, soon to
be 31, and all but three of the 10 non-euro countries are required to join the euro at some reasonable point. The
three exceptions are Denmark, Sweden and United Kingdom, and even for them, it's a question of when, not
whether.

TdS: What about Paul Krugman's point in his January 16, 2011, New York Times Magazine article, "Can
Europe Be Saved?" -- that having its own currency has helped Iceland climb out of its recent financial crisis?

MB: If Iceland had been using the euro in 2008, its financial crisis would not have become a devastating
currency crisis. Paul Krugman compared Iceland to Brooklyn and noted that it makes no sense for Brooklyn to
have its own currency because its economy is enmeshed with that of its neighbors. In a global, digitized world,
Iceland's economy is enmeshed with that of its neighbors, too -- even if separated by an ocean. Iceland is one of
the four current "Candidate Countries" to join the European Union, with membership expected in 2012. Then
the process for joining the euro zone would begin, as required for new EU members.

TdS: Why did you say that moving to a future Single Global Currency depends upon the success of the euro?

MB: Presently, the world has regional monetary unions, such as the European Monetary Union, the Eastern
Caribbean Monetary Union, and the West and Central African Monetary Unions. The EMU is the largest and
most successful and is growing, and is a model for future monetary unions, including the future Global
Monetary Union. Several Persian Gulf countries are forming a monetary union, as are several East African
countries. As the euro zone grows, people around the world are increasingly asking the question: if it works for
17 countries, soon to be 31, why not for 192?

TdS: How would the world implement a single global currency?

MB: The world would implement a single global currency by expanding existing monetary unions, by folding
them into a single global currency. The Single Global Currency can be said to exist when these currency
consolidation trends create one currency for countries representing approximately 40-50 percent of the world's
GDP. After that, we will have passed a "tipping point," and the remaining countries will clamor to join.

TdS: How are you spreading the word around the world about your belief in the need for a single global
currency?

MB: We have a website, and we have published a book, The Single Global Currency - Common Cents for the
World, and the subsequent 2009 edition of that book. When the people of the world learn how good a single
global currency will be for them and the world, the movement toward that goal will accelerate.

Thanks so much for your time, Morrison. You've certainly given us a lot to think about. Good luck!