Towards a World currency
or at least
a World monetary standard

Why accept a global monetary collapse?
Instead of building
global monetary bridges
such as the WOMOST and WOMOI?


The current distrust towards most currencies and a lack of real global
monetary system bring the menace of a general monetary collapse.

It is urgent to organize things more seriously.
It seems too early to create a full fledged World currency / money.
But at least a World monetary standard (the WOMOST)
managed by a World monetary institution (the WOMOI)
with some cooperative legal traits, has to be implemented ASAP.

  • Warning:
This is a highly complex topic,
thus this article is still a working paper.
Comments are welcome !

Out of the currency mess

Building a global monetary sous
pont sous bridge

A reminder: what is money nowadays

Money, the Swiss army knife of the economy, as a
tool of exchange, valuation and value storage
,
is less and less made of banknotes and coins.
It is more and more an electronic blip.


Money is nowadays mostly created and managed by the banking system,
in the form of bank deposits, which support various,
nowadays mostly
electronic,
tools of payments and transfers.

Central banks still have a role in money issuing, but chiefly as supervision
institutions and "last resort" lenders.


OK!
But what is backing that creation?

What gives money its value?
Money is essentially a chain of commit legal commitments:
Borrowers committed to banks, themselves committed to depositors,
as detailed in the what is money article.

But as moneys are diverse, and diversely controlled, is the chain
always and everywhere fully safe?

A World monetary collapse in the making

The wind of distrust
Currently, there is some doubt, even some anguish, about how - at the
World level - the chain of commitments stated above is reliable.
We see a nascent distrust towards the major currencies,
not to talk about the volatility that makes smaller ones
out of control.


The high volatility in Forex (foreign exchange) quotations is a symptom,
the price rise (and setback) of precious metals is another, the sovereign
debt turmoil adds to the picture. The absurdly low interest rates seem
to signal an oversupply of money, a cheap commodity without much
value and a recipe for bubbles.

There is a double problem of trust:
  • 1) One linked to the World financial and economic environment
It has deteriorated since 2007,
It suffered a long chain of turmoils and dramatic crises, under the virus
of
lever  overleverage (excessive debt), whether public or private,
one of the worst enemies of money (and economy).

To take only a few examples of the unsolved issues,
affecting notably
some
monetary zones (roughly related to what was called up to now
the developed
countries that ceded (except a few wiser countries) to
the belief that "growth" can be bought with debts instead
of deep
structural adaptation).

    • Important trade distortasymm imbalances persist
(an excessive money creation by the US notably was and is still
a
factor.
But structural evolutions play a part too.

    • Most Western governments (but also businesses and private 
persons) are highly indebted (see sovereign debt crisis and
overleverage)
    • Some central bank portfolios are filled with dubious assets
They were amassed through "quantitative or other schemes to
rescue banks or to buy sovereign debts and other risky assets.


They are also keeping low interest rates, in other words their
activity, although highly risky, is unprofitable, which makes worry
on their own safety and on the value of  the money they control

(central banks are supposed to be the supreme masters of good
money creation and management).


=> Some of those central banks, currently praised as "lenders of
     
last resort" that could do wonders at times, could have one
     
day a crisis of trust, as the money / currency they issue is
      backed by perilous assets.
  • Of course, commercial banks are also weakened
as they are key players in creating and storing money in deposits,
and also they use some refinancing from central banks, thus
depend on the health of those exalted institutions.

Also insurance companies and investment / hedge funds
which portfolio run similar risk.

The streak of solvency rating downgrades led to "recapitalize"
various key banks.
But the stricter equity and liquidity rules for
banks give an incentive to "shadow banking" to take over dubious
types of lending and fund it via overleverage.
    • 2) The other one linked to a more permanent and intrinsic issue :
  • The global monetary governance deficiencies,
    as the international monetary system is not a system
    but an unorganized / erratic blob.

    Those genetic flaws have been plaguing it for decades and this article
    details them extensively below.

    The Bretton Wood agreement after WWII was flawed as based on a
    national currency,
    the US dollar, as a universal reference and official
    reserve. This agreement
    logically collapsed in the 70s although the US
    dollar kept a quasi-preeminence in practice, but which is progressively
    eroding.

  • => There is a blatant lack of clear and stable monetary references
          and of
    a global monetary governance that would allow the
          system to resist a major storm.
  • The combination of those extrinsic and intrinsic factors
    makes the system (or lack of system) disorganized, erratic, chaotic.

  • There is no pilot in the plane!
    => The demise of the present system seems only a matter
  •         of time
  •         The lava is rising within the volcano, the eruption can happen any
  •         time.

  • * Will it take the form of a general monetary collapse?
         => A flight from cash
    towards any other "exchangeable"
                asset?

              
    While monies would themselves become
    toxic assets?
         =>
    And as a result a major economic tsunami ?

    * Or will an alternative system be implemented before
        too late?

       
    It supposes that the heads of governments accept NOW to
        share their beloved sovereignty
    , something we can be
        pessimistic about.


    The issue is strongly linked to another, the
    sovereign debt
    turmoil.

    We have twin menaces here !

    This article analyzes those monetary flaws and proposes
    a path towards a more consistent World monetary system.

    Lack # 1: no monetary pivot, reference, standard

    Lacking a standard global meter

    We live in a "multilateral monetary system" based on floating currency
    rates
    .


    Why not, it can help those currencies to find their own position in the
    galaxy of moneys.

    But there is no universal measure standard of value to
    see clearly their
    coordinates in the celestial map. 
    As if we had a metric system without meter.
     
    This lack of common reference favors indirectly a "currency war" as
    currencies
    are pitted directly against one another.

    The old monetary pivot, the US dollar, is now in some respects a lame
    duck.

    It has also the disadvantage, as seen below, to be managed so as to fit
    a sole country's policy, not the overall global interests.

    Also, none of the other major currencies is up to the task of becoming
    such a central reference


    Some think about gold as the default reference. The gold price has
    been raising
    for years (presently this bubble is losing its resilience).
    But for various reasons, shown below, gold seems unfit to become a

    monetary pivot or yardstick
    .
    Is the floating exchange rate system the real problem?

    Some accuse the floating exchange rate system (well, not a system, just
    a free
    quasi-natural process in which several goods are offered on the
    market stalls)
    for the instability.

    This accusation does not address the real issue.

    As long as there is no global currency
    , and as seen in this article,
    it can only be
    a long term goal, the World lives obviously with a motley
    and unstable monetary system
    .


    This is not a flaw in itself: as long as there are several currencies,  it would
    be illusive to consider that any currency can have a fixed value relation
    with others
    ...if we find a common yardstick (this is what is missing, a
    point this article will detail) to have
    a clear view of that currency's own
    value
    .

    With this only reservation, this lack of a common reference of value, in a
    multi currency world, a floating exchange system is much more flexible
    than a pseudo fixed rate system
    , something the world experienced
    already several times and which could not work.


    The fixed rates were a source of highly disruptive and speculative moves
    with episodic dramatic "competitive" devaluations and reevaluations.

    The most famous of those systems was instituted in Bretton Woods
    after WWII,
    and collapsed under its contradictions and inconsistencies
    in 1971.

    Moreover, the commercial distortions caused by the unjustified
    persistence
    of some fixed rates, like for the Chinese yuan, do not
    really makes palatable
    a general pullback to that old system.  
  • So, what is the real problem?

    The real problem at the moment is not in the floating rates,
    but in the fact that there is no commonly recognized
  • general standard in which to make the quotations.
  • What is lackinf in gmobal monetary matters is something like
  • a single measure of temperature, length or whatever.


  • Every engineer will tell you is a source of confusions that send rockets
  • crashing into the sea.

  • To have, as is now the case, only a matrix of multiple cross-rates
    between
    all currencies, without a common yardstick (monetary
    standard), is far from
    being transparent (*) as a tool to measure
    what happens on the forex (foreign
    exchange market).

    => When the price of A goes up compared to the price of B,
            does this shows a rise of A or a fall of B?

    (*) Conjurers, who know all the tricks, would call it an optical
         illusion.
  • Lack #2: no global monetary governance

  • Lacking a World monetary sheriff

    Also, and this is one of the paradoxes of our globalized economic and
    communication
    era, and whatever the secret but episodic coordination
    between central banks
    , no global institution really supervises
    the world monetary
    situation, in order to:
    • Provide a common currency price reference as seen above,
    and also an unquestionable monetary interest rate
  • reference, not the subjective (and manipulated) reference
  • was revealed by the Libor scandal.

    • Be the World central body that would play the role of

      Guarantor / manager of that monetary standard,
      Universal reserve depository for central banks,
      Lender of last resort
      World monetary regulator and Court.
    • Monitor the global volume of liquidity and credit,
  • and global interest rates, instead of those key economic
    factors still been
    driven by the US monetary policy,  just
    because the US dollar is  seen  as the world dominant currency.


    Is King dollar naked?
    How can a currency issued unilaterally by a country on

    its own interest be the world currency that drives most
    transactions ?
    A  recipe for economic instabilities and distortions

    (exchange rates, trade balances,  speculations on
    financial assets)!


    An excessive creation of dollars, bringing an overflow of
    liquidities
    which value is doubtful, thus that circulates full
    speed to get rid of it (Gresham law : bad money drives
    out the good) is a source of bubbles and Mirach's


    Also the sanctions on foreign banks that used the US
    dollar
    in operations
    not accepted by the US policy is
    another bullet in the dollar's
    own foot.
    How foreign countries with huge dollar reserves will
    react now
    that they know that it is a biased currency
    that cannot be used
    freely ?
    What currency will use now financial and
    commodity
    markets as freely accepted in global transactions?

    A guerrilla against the dollar?
    The pressure accumulates gradually against the US dollar
     dominance.
    This currency's weaknesses (or at least volatility and other flaws
    are more and more visible. But how to know when the "critical
    threshold" will be reached
    that would make it turn into a
    currency like the others.
    Or better that would make the creation of a word monetary
    standard
    seen as essential because of the above mentioned instabilities
    and imbalances  ?

    But things are sticky, we suffer the well known anchoring bias,
    unless only a disaster accelerates the process (cf. Bretton Woods).
    We could talk about the system theory ...except that the current
    global  monetary system  ..has nothing of a system and take little
    by little the form of a battlefield , or at lest a guerrilla field.


    From where the next attack will come ? Or the next triggering
    event ?

    Some expert of asymmetric wars in the room ?

    The IMF is not up to the task
    , not only in financial firepower but also
    in legitimacy,
    because it is not a real independent global entity, even
    less a democratic body that would represent the world citizens, but a
    bargaining place between nations with diverging agendas.


    What are not up to the task either are all "inter-governmental" (instead
    of "global") bodies, including the UN. 


    The "
    democratic globalization" article shows that a global democracy is
    needed to face
    the global challenges.

    A new example of the deficient, nation-driven world governance,

    specifically in the monetary area, was seen in a Feb. 2011 decision

    by the G20 members (85 percent of the world economy) to follow

    economic indicators.


    OK, except that they were limited to countries' public debt and

    fiscal deficits, private savings rate and private debt, trade balances

    and net investment income flows.
    This was a half-measure as - because of China opposition - those

    indicators do not include monetary / foreign exchange

    ones i.e. real exchange rates (also a truly global currency reserves

    pool is missing).

    Also nothing was decided about if and how those indicators would

    be used at the global policy level!

    What options?

    * A private monetary "coup"

     Take over bid on our purses?

    By not tackling the issue with a global vision, national politicians run the
    risk that their monetary power be overtaken, not by a common sovereign
    monetary body, but by large economic and financial groups.

    Those private business entities, fearing the instability and fragility of the
    present situation, that entails the risk of a general monetary meltdown,
    and tired to see governments dithering on the issue, could get tempted
    to create in an emergency their own common currency that would become
    a universal monetary reference.
    => Those groups would as a result make their own money.
            With their own rules, in their poach own interest,
            in an undemocratic way.

    * Regional monetary zones?

    Blocks of money?

    Regional monetary zones are in the making, as a palliative for the lack
    of a stable and trustworthy currency to deal with the bulk of international
    trade. Maybe also as a political reaction against the US dollar supremcy

    In Asia, such attempts - inspired by the Euro, which was a first dent
    on the US dollar hegemony -
    can be detected, as based on the reciprocal
    acceptance of their currencies in trade operations and on currency swaps
    between central banks.
    There is no reason that the inter-Asiatic trade, in full growth, be done in
    US dollars.
    This does not means that the Chinese yuan, a non convertible currency
    up to now,
    will become soon a new world monetary standard. But it is
    gaining
    ground through monetary swaps with other emergent currencies.

    Maybe a similar zone will also emerge soon in Latin America.
    Or one among other emergent countries
    Also some alliances between large zones can be initiated.

    For example the largest and most advanced emerging countries, which
    have some distrust towards the US dollar and the US debt in which a
    big portion of their monetary reserves are invested, could decide to
    participate to a support fund of the Eurozone.

    But how stable and permanent can be such alliances ?

    Anyway, such a limited monetary multilateralism under the hand of
    regional blocks
    can bring some more trust and facilitates various
    transactions.
    But it does not solve the global issue, it even creates new divisions,
    and it does not cancel the menace of a worldwide storm.

    * A World money?

    Same picture in every pocket?

    There are few chances that a unique and fully legal World currency
    can be launched and can work in a foreseeable future as:
    • It adapts poorly to territories with highly different states
      of economic development.
    Of course a two tier system between resilient places and fragile
    ones might be imagined.
    • The opposition of nation-states, would be too strong.
    They consider money, although it is basically just a tool to exchange,
    measure and store riches, as something "sovereign",
    a symbol of state
    power and a (hazardous) way to manipulate their economy,

    Those two reasons are not fully convincing.

    * The notion of "optimal monetary areas" is reductive. 
       It is often used only as a brilliant academic pretense.

    * Nations might not stay blind eternally, opthalmic technologies are
       progressing.

    But unless we make some minimal progresses toward a World
    federation, a full-fledged world money seems out of sight.
    => Global democracy would need one day an all-
            purpose legal World currency that all Earthlings
            would use
    .

    But this is a long term goal.
    A
    gradual transition step is needed.
    * A World federal official monetary body 
       and monetary standard?

    WOMOST and WOMOI, a balanced approach
    The transition step mentioned above
    would be based on
    An official world monetary standard,
    as an universal reference of value.

    It has to be implemented urgently,
    before the global monetary tsunami strike!

    For a long time gold was that standard.
    Because of its defects (see below), it would not be up to the task.
    Instead, a "virtual gold", as the seed for a WOMO (World Money), would be
    more appropriate nowadays.

    It would start as:
    network A World monetary standard (the WOMOST).

    Such a virtual being would seem to be made out of nothing (of course,
    this is not true, as seen below) but only at the time of its creation (like
    the numbers, or like our languages in general).
    As soon as important transactions, contracts, quotations and financial
    commitments and instruments are written with it, it will be a
    tangible reference of value.
    • To be effective and have a full consistency the WOMOST:
    Should be linked to econsector economic activities.
    Thus it will need to be backed by economic commitments,
     just as all monies
    are
    made nowadays as seen above, but with
    a global supervision that is presently lacking.
    • Should be managed in a cooperative way,
    with enough independence from leading countries, so as to
    have public legitimacy
    and to avoid any national hegemony
    to take over.
    =>Here we have the other leg of the biped :
    luckA World monetary institution (the WOMOI).
    To implement such a standard and of such an institution seems to be the
    reasonable minimum step to face the present situation
    , which is
    getting more and more chaotic and disastrous without common global
    reference and governance.

    This first step, still far from a full fledge universal money, would be
    limited to:
    • At the governance / supervision level,
    a World federal monetary authority
    (the WOMOI, World monetary institution)
    • As a section of it, at the operating level,
    a global agency responsible for the monetary standard (the
    WOMOST).

    It would have some of the attributes of a central bank (a central bank
    of central banks ?)

    WOMOST / World
    Monetary Standard

    WOMOI / World
    Monetary Institution

    * The reference and pivot for
      
    Forex quotes,

       It would be thus compatible
       with
    floating exchange rates

    * With a self standing value,
       as
    an independent standard
      
    based neither on precious
       metals nor
    currency
       baskets.

    * Also an optional quotation
       tool
    for bonds, stocks,
       commodities, contracts.




    * Democratic federal cooperative
       statute

    * Supervisor of the world financial
      
    and banking system, including
       "sovereign" aspects.

    * Legal power to put in check any
       (blatant)
    monetary and financial
       distortion / excess (in goods
    / asset
       prices, interest and exchange rates,
       money
    creation, debt (overleverage),
        public budgets, financial market
        practices...)

    * Central bank of central banks
       (reserve pool and liquidity supply
       bank for a smooth
    money flow
       between the various monetary zones).

    But even this first highly needed step would not be too easy
    to take.


    Nation-states stay anchored to independent national currencies (or at
    best continental currencies as in Europe), whatever the problems they
    entail and the crises they tend to lead to. 


    Another thing is that money holders believe that a traditional nation is a
    better warranty than
    a world institution, because the nation's taxpayers
    are going to ...pay if the nation's
    central bank defaults. 
    This is based on the dubious belief that nations are really and fully
    accountable towards the rest of the world when they collapse financially.
    => This is this first crucial step this article proposes below

    But then, what World monetary standard?

    No, not gold, but economic commitments (credits)

    The return of the relic?
    Some see a come back of gold as a monetary standard.
    New cooking in an old pot!
    Gold use as a reference of value has spanned several millenaries
    of human economic History.
    It has often been glorified as the absolute, even transcendental
    reference.

    Gold came back into
    fashion fashion and its price has been raising
    for years, although
    there is now a backlash
    This might have given the impression that this mythic metal was on the
    way to become the absolute trusted value.
    Beware of that myth! Evolution has struck!

    Actually this dramatic (now interrupted) rise have shown, precisely, that
    the gold value is highly unstable, making it unfit to become a monetary
    pivot in our modern times.

    Is really a rare and glistening metal extracted from the Earth adapted
    to this new era?
    A highly evolutionary globalization era in which the reference of value
    should be the whole World economy.

    A dynamic environment in which the mass of available money should
    evolve as far as possible in direct relation to the growth of economic
    activities and exchanges.
    The available monetary instruments give an universal right on all riches
    and their value does not have to be correlated to the value of a specific
    asset.

    Here, let us look at some of the gold shortcomings:
    • Physical gold is not practical to handle.
    There is a high cost involved in producing, acquiring and storing
    this scarce and expensive asset which, frankly, does not have much
    direct economic use.
    • Gold does not have a stable value (high volatility).
    This is common to many physical assets (and other assets) which
    value fluctuate largely and rapidly because of erratic offers and
    demands variations.

    The gold value is not linked to economic activities and trade
    needs
    .
    Actually it would bring a deflationist bias
    because of its limited and feebly
    growing available quantity on a long period.


    The same defects affect
    other assets, whether
       * hard ones such as commodities
        * or softer
    ones such as corporate shares. 

    As for some even "softer" social or individual assets, notably human
    knowledge (it is often said that we live more and more in a "information
    and knowledge society"), not only their value is less determinable, but
    there is no way to transform it into an
    exchange tool.
    Ask an alchemist!

    Thus it is not just by chance that modern money, as said above in this
    article, is based instead on credits, as assets that represent human
    commitments related to the economy.


    A reference currency, issued by a world monetary
    authority
    acting as a global reserve bank

    A world monetary pilot and a World monetary pool


    A monetary globalisation could lead to:


    1) A
    World financial authority that would act:
    • As the authority and Court
    in charge of anticipating and preventing turmoils that would affect
    as well financial institutions
    (as was the case of the
    subprime crisis)
    as countries (
    sovereign debt crisis)

    It will have a direct (supranational) legal authority, and an adequate
    staff and technical equipment
    to put in check blatant:
      • Monetary and financial unbalances / excesses 
    in money creation, economic and financial prices, interest
    and exchange rates (commercial dumping via undervalued
    currency), public budget and public debt levels.

      • Abusive financial practices under cover of "innovation"
    It will here fulfill the role of  World financial police
    withlarge investigation technical and human resources
    and powers.

    Including
    paid informers and undercover agents, as
    financial crime is as high a menace as terrorism or drug
    dealing
    .


    A good overseeing system is more important than an hyper
    regulation
    which is so cumbersome that it cannot really be
    applied, and which cannot foresee what funny businesses
    will be imagined in the future.

    That investigating body should not limit itself to banks but
    should also have an eye on "non-banks'. Its area should
    cover any financial entity of some importance.
      • Other imbalances, by a narrow coordination
    with other world institutions (ILO, WTO...) which objective
    is to harmonizes commercial and social practices to
    avoid
    harmful distortions.
    • As the supervisor of the world monetary agency / bank 
  • mentioned above and detailed below, which financial role would
    include monetary
    aspects (bizarrely not covered by the IMF
    presently)


    • As the supervisor also of a global bank guarantee fund,
    financed by levies on the "too big to fail" banks and other financial
    institutions that
    could entail a global systemic financial risk.

    2) A World monetary reserve bank
          (a kind of super central bank at the global level)

    Its monetary activities would plant the seeds of what would become
    a true world standard currency.

    The full 1) + 2) system
    , a totally different
    "IMF - International Monetary Fund"
    , that would be

    * endowed with those badly needed judiciary, financial and
      
    monetary attributes,
    * democratically governed (see "the piloting authority" chapter),


    could be called, as already seen above:
    the
    WOMOI (World Monetary Institution)

    Floating exchange rates would not disappear

    OK, a new
    standard is to be found.
    But not like the old "bancor" project
    , sorry Keynes.
    That reference of value would have been at the same time highly volatile /
    speculative (as based on the price of commodities) and over-rigid (with
    fixed currency rates linked to the standard).


    The new standard, in this first step, would just be a common and
    independent
    network  pivot of value to measure the value of the
    other currencies
    on international foreign exchange markets (Forex).


    Presently, if there is a big change in the Euro - Dollar rate, how do you
    know
    which one rises and which one falls if there is no global pivot /
    price reference ?


    The exchange rates would still be floating, as flexibility is needed 
    in this step (by the way, pressure should be applied to China to make its
    money convertible and
    fully tradable).
    And the global unit of accounts, this common meter or kilogram, the
    WOMOST issued by the WOMOI, would allow to gauge better the
    general state of currency fluctuations.

    Also, the policy of the WOMOI, as a global monetary pilot, would
    allow to control any wild rate skidding..

    An independent standard


    As a universal near-currency, used as national / continental central
    bank reserves (*) or for asset / commodity market quotations and
    contract quotations, as seen below, the WOMOST, World
    monetary
    standard
    , should be independent of national / continental currencies.

    (*) those central bank accounts would be the counterpart of the WOMOI
    issued.

    It should be self-standing to avoid a "circularity" that would contaminate
    its value with
    the vagaries of national / continental currencies.
    The value of those currencies should refer to that standard, but the
    standard should not be enslaved to the value of those currencies
    .

    Practically, its value should not reflect a "basket" of national /
    continental currencies as is the case for the IMF's Special
    drawing Rights (SDR).

    It has anyway to be noted that the IMF did not went far enough in
    issuing bonds denominated in SDRs, that would have accustomed
    the financial circles to the idea that a World monetary unit is
    feasible, and to the need of a market to use it.

    Technically,
    what
    issuing process, securities, governance?

    The piloting authority

    Talking to the shop manager

    Only a central body, the WOMOI, which attributes are described above,
    and that would be - a decisive improvement - totally autonomous
    and democratically appointed
    (*), can organize and monitor the
    creation of a credit commitment money adapted as well to the economic
    activity as to the general need of the economic players.

    This global institution, a kind of "super central bank", would issue the
    reference currency
    .
    It would also control in some way the national / continental
    central banks
    that issue their own ones, as that institution would be
    in charge of the cash-register of last resort.

    (*) It should one day become a
          "one man one vote" World citizen cooperative
    ,

          even if the road towards that goal is long and hard so as to avoid it to
         
    become dominated by businesses, nations and politicians with their
          agendas. Maybe the issue of local sections would arise, but for crucial
          questions the vote should be worldwide.

    This is a condition of legitimacy and of independence for the
    WOMOI and of reliability and sustainability for the WOMOST
    (**).
    The WOMOI should be independent like the magistrates and jurors of a
    Court, with a full separation of powers. Montesquieu-style monetary
    governance!

    Also, the WOMOI should not just be a producer of arcane but self-
    defeating
    hyper regulation but a legal body with a highly competent
    staff, extensive, sophisticated and adaptive means and full authority to
    anticipate, investigate, stop and sanction any serious deviation from
    sound fundamental principles


    (**) if not it would just be another international treaty that a country
           could quit or consider not binding, or more probably
    condemned
           to inertia as the partners would spend their time squabbling,
            like in existing inter-national institutions,
    instead of taking
            decisions and reacting to situations.

    Central banks refinancing, reserves pooling,
    money issuing

    The two sides of the balance sheet
    .
    The balance sheet of the WOMOI, should not be too large.
    Its goal is not to compete with the overall commercial banking system.

    That system will create (of course under the supervision of the WOMOI)
    its own
    interbank monetary market in WOMOST for cross-financing
    operations
    between banks.

    The WOMOI should stay mostly a regulator, a lender of last resort and
    holder
    of a universal monetary reference, but not the everyday refinancing
    body.


    Also the commercial banks would create by themselves accounts, traveler
    cheques and other instruments in WOMOST.

    The WOMOI balance sheet would include

    *
    As Assets (credits and investments / reserves)
    • Some, mostly exceptional, short term credits to central banks,
    granted in WOMOST with interest rates that can differ
    according to the monetary risk situation of the related zone.
    • Also accounts written in those other central banks currencies
     (see below the interventions in those currencies).
    • A limited amount of Treasury bonds,
    with clear limits for every issuing nation or territory and
    preferably written in WOMOST.


    Can they be called "credits" or "reserves"?

    Let us say that they are credits that are supposed to be liquid
    enough
    to act as "exchange reserves", enabling the WOMOI
    to intervene on foreign exchange markets by buying,
    selling
    and swapping other currencies.
    • As a "cushion" ("reserves") some other assets and investments,
    including gold, with its image of trust whatever its drawbacks already
    described.
    Commodities, stocks, corporate bonds and other liquid enough assets
    would not be totally excluded
    but also in small doses as too volatile.

    *
    As Liabilities
    (resources)
    • Equities,
    which could be of two kinds (two sections, or shareholder funds)
      • Class A equity: world citizen shares.
    There would be a "one man one vote" World cooperative
    section
    of the WOMOI.
    • Class B equity:
    subscribed by governments, central banks, world institutions.

    The proportion between equity A and equity B would evolve
    gradually,

    The A section would be given more vote than the B section, at
    least in

    proportion to its equity contribution, for example 5/1.

    As the equity capital should be sizable from the start,
    the A section
    could at the origin represent over 99% of the
    subscribed capital and
    given 95% of the votes, a ratio to be
    gradually
    lowered.

    • Deposits (monetary reserves)
  • by national / continental central banks
    (including compulsory interest-free stable ones),
    used
    as a  luckreserve instrument for them.


    Some national central banks that are swimming in dollar-
    denominated reserves
    could find some relief in transferring a part
    of them
     to the WOMOI so as to have them written in WOMOST.

    Traditional reserve instruments (in other currencies, in gold...) used
    by central
    banks will coexist, but the "super-reserve" currency, the
    WOMOST might 
    gradually build up to reach a key proportion of
    their reserves in their own balance
    sheet.
    • Also WOMOST- denominated bonds,
    as a stable resource to complement the WOMOI equity.
    They would be here also subscribed by central banks and governments,
    but should
    be offered after a while to the general public, and traded in
    bond markets.

    The IMF decision to issue 5 year SDR notes in 2011 will give some
    experience
    on how central banks and financial markets react to z test
    in that direction.

    • Maybe a first batch of banknotes,
    convertibles in all major currencies, but sold by auctions as
  • collectibles, so that the general public can consider that it can
  • also be "its" money, and can even start to use it, by anticipating
  • a full fledged World money.

  • What the WOMOST would be used for

    The three blades:
  • * Reserve currency,
    * Standard of currencies value, 
    * International quotation tool
  • This triangle means that its two "primary" double role of

    * A common reserve currency (for central banks)
    * A common currency exchange standard (for forex quotes)

  • would not be enough.
    To give a consistent economic value to the WOMOST, it would
    be
    necessary to enlarge from the start its role by making it a reference
    in key
    international economic and financial transactions.
     
    That would make it progressively closer to be a World money as a
    tool to measure economic values and a tool of exchange
    .

    Thus, could be progressively quoted in WOMOST:
    • The international commodity markets and major asset market,
    • The large international contracts,
    • The issuance of sovereign bonds (and other bonds).
    • Some saving saving deposits offered by banks worldwide.
    Of course this would not solve the issue of excessive market
    price volatility
    for commodities, currencies and financial assets, that
    are caused not only by natural economic factors (years of fat cows vs.
    years of skinny ones, to take a known allegory) but also to a lack of
    coordination and harmonization of economic and fiscal policies between
    the countries involved.


    But the WOMOST would anyway bring some buffer to global asset
    pricesas they
    would not be linked to the situation of a national / continental
    currency used to quote
    them and which could itself have a high volatility
    period.

    To give an example, who can say in the current system, when the price of oil
    quoted
    in US dollars rises, if the cause is a shortage of oil or a glut of dollars?

    Making it a largely used / sustainable system

    The system can work not only it it provides some new oxygen to avoid the
    general collapse that is menacing but also if it has all the traits of a sustainable
    system, therefore if it is

    • Legitimate: as seen above,
    the WOMOI should be more than an inter-national outfit in which
    nations squabble,
    but a global federal democratic institution with its
    own authority.
    • Highly trusted:
    Not only the WOMOI needs a truly empowered federal structure,
    an independent governance and a strong political weight. But it
    should also have sizable stable resources (see above also on what
    its balance sheet would rest).

    Even if the WOMOST would not be a full fledged money, it should
    offer at least the same guaranty, and preferably a higher one, than
    national currencies.
    • Largely used,
    by developing fast enough the above mentioned roles (reserves,
    equity and bonds issuing, contract and markets reference...) so as
    to obtain a huge market volume that guarantees full liquidity
    for any transaction whatever its size)
    • Largely accessible and usable:
    convertibility of the continental / national currencies, free use in
    alternative to those currencies.

    Side currencies

    There are private currencies used locally - or more universally in small
    circles - with their value either self referenced or linked to an official
    currency
    Well, another thing, more general: every person could be declared to be
    a bank which can create a limited sum of its own money...


    The only difference with official money is that nobody that is not a
    member
    of such closed system has to accept those "club tokens" as
    currencies.
    They can be seen only as additional monetary tools.

    But beware, the "bitcoin" experience
    is far from convincing

    Can we go further
    (hypothesis of a World money)?

    To be strong and trusted, a unique full-fledged World money
    would rest on institutions on the World scale with enough political and
    economic and political integration.

    What prior steps?

    This would entail, if not a fully federal World,
    • At least a well advanced World organization towards that goal,
    that would go further that simple cooperations
    • Or, at best, isolated federal bodies that would deal with
    some very specialized areas and issues.

    This scheme is studied in the democratic globalization article.

    Only after that first step towards some World wide organization,
    a full-fledged World money would be in sight.
    It is hard to imagine it implemented fast, whatever the urgency.

    Nations still prefer to bite at each other.

    They shun the idea of a real counter power that would make the 21st
    century World
    emerge as a civilized one.

    There is still the idea that money is a sovereign attribute, not just an
    economic tool (of course to be issued within a legal framework and a legal
    supervision, to protect
    the users) .
    Also nations are tempted to manipulate their money according
    to their trade and fiscal situations, an expedient to compensate their
    economic weaknesses instead of tackling them.

    How would it work?

    => It would rest on a World issuing institution (World central bank)
           controlling a network of official territorial banks (the nodes of the
    network).

    This would be rather similar to the European Central Bank or the Federal
    Reserve Board.
    But in a more democratic way, as it would be based (as said before for its
    embryo, the A section of the WOMOI) on a cooperative statute.

    Hard to give more detailed indications at this stage
    as it would depend on a real World political integration


      (sample / échantillon)

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    M.a.j. / updated: 12 Oct 2015
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