The more one delves into the question of whether a single world currency is a good idea or not, the more murky and difficult the issue becomes. These barely brush the surface of the area but here are some basic pros and cons:
1. Many regions are already heading in this direction (Europe, Asia, Latin America) opting for a regional currency to encourage commercial efficiency, economy of scale and utilize physical proximity while reducing trading barriers.
2. A single world currency would make the practicalities of travel and trade more efficient and streamlined and currency speculation would come to an end.
3. The IMF (International Monetary Fund) already uses a form of new world currency in SDR’s (special drawing rights) which are not real currency but a claim on usable currencies of IMF members which can be converted into whatever currency a borrower requires.
4. Global imbalances, large volatile capital flows, exchange rate pressures and rapidly growing excess reserves could lead the world into the next global crisis. A single currency would remove a number of these problems.
5. Smaller more vulnerable countries would gain certainty and stability from a single world currency. There are some cons for smaller countries too.
1. There would be many different and divergent economies, some doing well and some not, all with different interests to protect, all using the same currency. The initial period would be painful with the loss of some national fiscal tools. The risk of one or many countries failing to pay its debt could have an impact on the others. This is the problem facing the Euro. However how this might play out under a single currency system could be quite different.
2. A world currency would to some extent undermine national sovereignty. A high level of trust would be required between countries to support a single world currency. Governments would have to accept a loss of some internal monetary controls in such an environment.
3. The US dollar seems to be losing some of its power as the dominant global currency. The Chinese (who hold most of the US debt) are jittery about America printing too much cash and thereby debasing the dollar. Whether this is sufficient reason for the world to move to a single currency is up for debate. Many economists still see a number of regional currencies being a more likely and acceptable option.
4. Right now, traders can choose which currency they wish to do business in. This creates competition in currency. With a single world currency there would be no competition and an effective monopoly. The conspiracy theorists of the world have long discussed the problems of the overseeing and accountability of a single currency system. The concern being that a small interconnected group of international elites could end up with too much power and control of the world monetary system.
As international trade and economic ties draw the world closer together, we can expect to see more talk of how to best regulate these transactions which will include increasing debate on the single currency issue.