DELHI SCHOOL OF ECONOMICS, 03.12.09
Hello. Thanks for your attention. I am Daniel Salomon, the director of the Sennacia Banko. As you know I'm here to give an introduction about our new currency called Mono, which will soon become the single global currency.
Let's start with a simple question: "what is money?" The standard answer economists usually give is:
MEDIUM OF EXCHANGE
STORE OF VALUE
UNIT OF ACCOUNT
A medium of exchange moves value from one person to another. If two persons do business across borders they face the problem of exchange rate fluctuations. The price of the same good or service can rise or fall with no evident reason. This is obviously impairing the whole idea of making a deal.
Store of value means one should be able to save money over time without running the risk of losing it. Here again, fluctuating exchange rates –or currency crises for that matter, can have devastating consequences for savers or for entire countries. Well, some also win money of course, but my point is that saving currencies is never safe.
The third part of the definition, a unit of account, means that money is used to measure the value of things. Imagine if the size of a meter or the weight of a kilogram were fluctuating like currencies! It wouldn't make any sense, would it? Why, would it make sense for money then?
My point is that the multicurrency system fails in all three of its primary functions.
To understand what money is, economists often use the metaphor of blood. The market is the body and money is the blood. All the concepts to describe blood circulation such as pressure, liquidity, volume and velocity, can easily be applied to money. So I'm asking: "Does it make sense to mix different types of blood (A+, B- and so on) in one body?" Common sense tells me it's absurd.
Money was invented in China 2500 years ago. Before the economy was based on bartering. The main problem was the asynchronicity of needs. That means: for example, if I am an apple producer and I need a haircut, the hairdresser doesn't necessarily need my apples at that exact time.
Another problem is the indivisibility of most goods and services. Let's say I have a cow and I want to buy an apple. Supposing I don't want to kill the cow, I cannot cut off a piece of the cow and barter it for an apple.
The introduction of small bronze coins was truly a revolution. If you think about it, money was an extremely brilliant invention, which made possible the incredible progress accomplished by mankind the last 2500 years.
When villages were separate markets, each village had its own currency. One market, one currency. So far, so good. Today if nation-states were closed markets different currencies would also be ok. But, as you all know, the world has shrunk dramatically and has become one big market. That's why the multicurrency system is obsolete.
Some would say we already have a world currency: it's the dollar. Since Bretton Woods, the dollar has been designated, formally and in practice, as primary international reserve currency. A reserve currency is a currency, which governments hold in big quantities in order to back up the liabilities of their own currencies. It is also used for the pricing of goods such as oil. This gives a tremendous power to the United States. A true global currency should be administrated by an independent central bank. No country would have the monopoly on issuing it.
Stability is the cornerstone of a sound financial system, isn't it? That's exactly what a single world currency would bring. It would per definition eliminate exchange rate fluctuations. That means less risk and more confidence. That means lower and stable interest rates. And that means more trade.
Furthermore it would eliminate transaction costs. That would save the world $400 billion every year. Can you believe that?
With no currency risk the value of the world's assets will increase by $36 trillion and trigger an additional $9 trillion in the global GDP. This will benefit everyone in the world.
The world is suffering the worst financial crisis since the 1930's. It is not originally a currency crisis, but the multicurrency system certainly does not help. As bad as the financial crisis is, much worse is yet to come I'm afraid. Climate change, exhaustion of natural resources, poverty, the world is facing great problems, countries can't solve separately.
A global currency will not solve everything. But it will force us to sit around the same table, agree on common problems and work together. It will bring transparency. It will establish fair rules of the games for all. It will probably prevent conflicts.
How realistic is it? I am holding 100 Monos in my hand. Mono is the currency issued by the Sennacia Banko (Esperanto for Bank Without Nation), the bank I founded a year ago.
Mono is not the official single world currency yet. But the seed is sowed. Everywhere I travel, citizens meet the idea with great enthusiasm. "But how can we make it happen?" they ask.
Well, there's actually something very concrete you can do. First of all you have to believe in it. Then tell your friends and your family... Show them a banknote. Tell them the solution is right there. Start doing business in Monos. We just need to convince a critical mass of committed people to make de facto Mono the world currency.
I will conclude this speech by a quote by George Soros, the famous currency speculator who made the British pound collapse in 92, and who now is a philanthropist and a political activist. By the way Soros is a native esperanto speaker. Here's the quote: "A stable currency should be a fundamental human right."