While the fiscal advantages that may be derived from having a single currency of the entire world have been often discussed theoretically, thus far, no one has actually introduced or endeavoured to introduce a common or shared currency for the whole world simply owing to the fact that any change from the existing multiple currency system to a single currency is sure to incur heavy political as well as financial prices - making the cost actually too enormous. In fact, the actual dilemma is how one goes about changing a monetary system comprising around 200 odd currencies circulating across the globe to a solitary one.
The matters would have been easier if the entire world was run by one government, as this would automatically result in the introduction of a single all over the globe. However, having a single government for the entire world is neither probable, nor wanted by the people who do not wish to give up their sovereignty at any cost. Nevertheless, if you watch the occurrences during the recent global economic recession, you will notice that it has made the possibility of having a single currency for the entire world brighter than ever before. This is primarily owing to the fact that several people have now started to question the effectiveness of the prevailing currency exchange rate system.
It needs to be mentioned that for a number of reasons, there is something exceptional regarding the monetary and economic situation prevailing across the globe which has made it more feasible to change to a common or single currency for Europe and the United States as well as the remaining regions of the world at a nominal financial price.
The foremost reason that has made the possibility of converting to a single currency system is that the fiscal markets worldwide have turned out to be more and more cohesive. Presently, different financial institutions are reaching over the globe and, as a result of this, international business deals are swelling every year. Having some 200 odd currencies in different regions of the world often not only seems to be ridiculous, but also an incompetent relic, keeping in view the fact that the world is coming increasingly closer each day owing to airplanes, advances made in the field of technology and most importantly the rapid spread of the Internet. Many experts have opined that the cost of continuing with around 200 national monies by far surpasses the expenses of transforming them into a single or common currency for the entire world.
It may be said that the launch of the Euro has been the primary move in the direction of having a common currency for the United States and Europe. In other words, the Euro will serve as a motivation for having a single currency for Europe as well as the United States. In effect, the Euro and the Dollar may be associated with each other as a single currency in the ratio of 1:1 giving equality to both the currencies. Many are of the view that combining the Euro and the Dollar to form a Eurodollar, the proposed common currency for the United States and Europe, would be a much simple task in comparison to the efforts involved in introducing the Euro on January 1, 1999 by merging 11 different national currencies of the member countries of the European Union.
The Maastricht Treaty signed in 1992 set a deadline for the European Union to introduce a single currency or the 'Euro' for its member countries by January 1, 1999. Accordingly, the countries partaking in the currency union were required to determine the value of their national currencies in relation to the Euro. The Maastricht Treaty underlined the fact that once the valuation of these domestic currencies with reference to the Euro was fixed, no fluctuation of these currencies either against the Euro or the domestic currencies of any other member countries of the currency union would be permitted. The agreement also stipulated the establishment of a European Central Bank that would be administering the fiscal policies of the member nations using the Euro as a single currency. In addition, it was agreed that some important European currencies, including the French Franc, German Mark, Italian Lira and others, will become defunct with effect from July 1, 2002.
Precisely speaking, the introduction of the Euro on January 1, 1999 has actually made the conversion of multiple national currencies in Europe and the Dollar of the United States into a single currency or the proposed Eurodollar for both the United States and Europe much easier in several manners. Firstly, the introduction of the Euro has automatically lowered the expenses of combining it with the US Dollar since both are the existing single currencies of two different regions. In addition, the introduction of the Euro, which involved transforming 11 different national currencies of the member nations of the European Union, has already ushered in the technology required to transform the Euro and the US Dollar into a single currency - the proposed Eurodollar.
What is more of greater significance is the fact that the monetary value of the Euro and the US Dollar is more or less the same and hence, it should not be much difficulty in merging the two currencies into a single money - a Eurodollar, at par or giving them both equal status. Nevertheless, some minor problems may occur and these could be solved without much trouble. For instance, compared to the value of one Euro, the value of one UD Dollar is less and hence, following the introduction of a Eurodollar, the people in the United States would face a drawback as it would involuntarily hike the prices of the goods from the United States in relation to the merchandise manufactured in Europe. Despite this hitch, trying to find any conversion rate, barring the one that grants parity to both the Euro as well as the US Dollar, would virtually make it impracticable to merge the two currencies into single money - the proposed Eurodollar. In fact, it is assumed that once the single currency is established for Europe and the United States, the price of merchandise would slowly but surely fine-tune ensuring that the merchandise in Europe and the United States has similar prices.
Although it has been over a decade now that the Euro has been introduced and it has proved to be highly effective in easing financial transactions between the member nations of the European union and done away with several problems that had existed with multiple national currencies in the region, one cannot say for sure when this 'single currency' will be linked to the US Dollar. In fact, many had thought that it would be possible to merge the Euro and the US Dollar to form a single currency on a parity basis by January 1, 2003, despites several efforts in this direction, it has not been a reality thus far. The primary aim of those advocating for a single currency for Europe and the US dollar was just to merge them into a common currency and in no way abolish the Euro and the US Dollar for ever. However, as things stand now, it will require more time to convince and build up confidence among the people as well as the leaders of Europe and the United States to move towards a single currency for both the regions.
Those who had hoped to see the introduction of a single currency for Europe and the United Nation on January 1, 2003, had also visualized the commencement of a new stage of cooperation between the European Central Bank and the Federal Reserve Bank leading to the establishment of the proposed Global Reserve Bank substituting the two central banks from two different continents. In addition, it was also hoped that the relations between the government departments in Europe and the United States would also be closer and coordinated following the introduction of a single currency with a view to supervise the fiscal markets in their respective regions. Moreover, it was envisaged that even the multinational business houses would also start preparations to operate their fiscal accounts in a common currency rather than the multiple currencies that exist now.
The advocators of a single currency for the United States and Europe also envisaged the introduction of a Eurodollar on January 1, 2005 with the proposed Global Reserve Bank being in charge of the fiscal policies for all the member nations using the Eurodollar as on that date. According to their projections, following the establishment of the proposed Global Reserve Bank, the central banks of the different European nations and the Federal Reserve in the United States would be entrusted with the task of executing the fiscal polices adopted by the GRB in their respective countries.
The advocators of a single currency for Europe and the United States were optimist that the third phase would commence once the proposed Eurodollar and the Global Reserve Bank have gained firm footing. During this third phase of establishing the Eurodollar, countries that had not joined the bloc would be allowed to become members of the Eurodollar currency union as use the money as a legal tender in their respective countries. In addition, any country that would be joining the Eurodollar currency union at a later stage will be required to pass through a probationary period lasting for two years.
They proposed that during period a country would be under probation, they may establish their own currency board and endorse its domestic currency with the proposed Eurodollar - something similar to what Argentina and Hong Kong are presently doing with the US Dollar. It would be essential for the country to create a link between its domestic currency and the Eurodollar and sustain the association as well during this provisional period. In the next step, all such nations would be required to permit the proposed Global Reserve Bank, which would be initially regulating the fiscal systems in Europe and the United States, to set up its controlling power or monitoring authority over the financial institutions (FIs) in their respective countries. In addition, the nations willing to become members of the Eurodollar bloc would be needed to give their consent to severe constrains on their respective government discrepancies (deficits) as well as the other factors of their financial policy, which could actually put their partaking in the proposed global currency union at considerable risk. Finally, once a country has successfully managed to sustain a secure association between its domestic currency and the Eurodollar for a period of two years (i.e., the stipulated probationary period) and has fulfilled all the monitoring prerequisites of the proposed Global Reserve Bank as well as its subsidiaries or agencies, the nation would be permitted to launch the proposed Eurodollar as its legal tender or currency.
Buoyed by the success of the introduction of the Euro, several people had begun to believe that the proposed Eurodollar - the single currency for Europe as well as the United States, would be a reality by January 1, 2005. These people had envisaged that even countries that would initially not be members of the Eurodollar bloc would be permitted to link their domestic currencies with the common or shared currency of Europe and the United Sates. They further suggested that such countries should not be permitted to introduce the Eurodollar as its legal tender currency till January 1, 2007 until they spent two years in probation and fulfilled all the prerequisites of the proposed Global Reserve Bank, that is supposed to supervise the fiscal policies of the new currency union as well as those in the member nations of the Eurodollar bloc.
