Single Global Currency

MGM 2012/2013 |

Single world currency-------------------------------------------------

Benefits, Costs and Feasibility |

International Capital Market & Exchange ratesProf. Lima |

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Richa Varshney, Swarnalee Naskar& Michael Kutz |

01.02.2013 |

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Table of Content

1 Introduction 3

2 The Gold Standard 3

3 Current international monetary system 4

4 Origin of the idea 4

5 Single global currency 5

5.1 Benefits 5

5.1.1 Reducing Costs 5

5.1.2 Enabling economic growth 5

5.1.3 Eliminating the need to maintain a foreign exchange reserve 6

5.1.4 Ensuring Fairness 7

5.2 Costs 7

5.2.1 Meeting the economic criteria 7

5.2.2 Devaluation of currency 8

5.2.3 Speculation 8

5.2.4 Adjustments of interest rates, money supply or exchange rates 8

5.2.5 Employment 9

5.2.6 Loss of Seigniorage income 9

5.3 Feasibility 9

5.3.1 3 G World 10

5.3.2 Effects on Financial Markets 12

6 Conclusion 13

Literature 14

Websites 14

Introduction

“The great struggle of history has been for the control over money. It is almost tautological to affirm that to control the production and distribution of money is to control the wealth, resources and people of the world”

6.5 billion people living in 191 member nations of the United Nations trade within each other in 147 currencies. Since Europe implemented Euro as their common currency there has been a constant speculation if the world is indeed in need of a global currency. The quest for a single global currency began in 1944 when John Maynard Keynes, the developer of Keynesian economies proposed a new global currency clearing system called the “Bancor”. With the advent of globalization and considering the numerous takes of various economists on understanding the word economy we could conclude that we would prefer a world with fewer uncertainties in terms of monetary policies and thus it becomes interesting for us to explore the feasibility of such a single global currency....