ONE WORLD CURRENCY
Since the last decade, the inclination of the global economy has been transforming from developed countries to developing countries. The world economy is confronting against the sluggish growth and the entire world is a victim of global economic slowdown. In order to strike the vulnerable economic locus of the world, The United Nations Conference on Trade and Development (UNCTAD) has proposed the one world, one currency approach. The one world currency envisaged one global bank of all central banks which ensures the integrity of international payment clearing and monetary policies of the different countries. It would make the grade to revamp the global economy. China has also insisted the idea of the one world currency.
The one world currency will be a uniform currency which would be accepted for the trade between the two countries. In prevailing state of international trade, the crunch is the huge volatility found in the currency market. Developed countries are losing their command on global economy along with its currency so that developing nations have to face the adverse impacts of currency fluctuations.
WHY IS DOLLAR A PRIME RESERVE CURRENCY OF THE WORLD?
- More than 60% currency reserve by the countries are in the USD.
- The highest number of foreign exchange transactions are trades of USD with other currency.
- USD is still on the top as a reserved currency by any nation.
Mostly American Dollar used for the international trade but it is unofficial international currency. There are many limitations associated with the US Dollar to use as an exchange medium.
NEED OF ONE WORLD CURRENCY
US Dollar widely used for an international trade. So, Federal Reserve Bank (FED) plays controlling part over the flow of US dollar not only in America but internationally as well. The American economy is not performing well. Hence, the adverse reaction of FED action immediately found in many countries like If FED Chief announced the hike in interest rate, instantaneous impact as a fall of the currency of developing countries would found. To eliminate the over dependency on one nation’s currency, there is strong need of one world currency. Moreover, there are many advantages which also serve as a need of uniform exchange medium.
Advantage of one world currency
- One of the finest features of the one world currency is that it will all pervasive and easy to exchange. It will eliminate the complexity of the payment for the international transaction.
- The one world currency will reduce the dependency on dominating currencies like US Dollar, Euro, and Chinese Yuan. All the international payment will make by a single uniform currency. So, the impact of economic volatility of one country will not affect much to other country’s economy.
- There are many countries whose association with its neighboring countries creates the conducive business environment which will facilitate economic integration like SAARC, BRICS etc. It will create the cooperative environment between the countries in order to bring efficiency and economy of scale. Same things may found if the practice of one world currency will implement worldwide. One world currency will reduce the trade barriers between the countries to boost the economy.
- The World Reserve Bank controls the international currency. The policies are formulated to facilitate not only the developed or developing countries but vulnerable or underdeveloped countries also get benefits from the use of the one world currency. The world’s reserve bank will balance the inflow and outflow of currency to reduce the fluctuations in the currency market.
Disadvantage of one world currency
- The increase of demand always resulted in a hike in prices. The countries like China and US are the main trading partner with rest of the world. The individualistic tendency of such countries may create economic disorder for many countries by increasing the reserve of international currency. If any country buys a substantial quantum of world currency, it will increase the demand for the currency in the international currency market which will be resulted into the increment into the prices of the currency.
- The risk of repayment of existing debt is always associate with the one world currency. The deficient performance of any country will affect the rest of the world. In short, there will be a huge probability of formation of vulnerable economic conditions like currently, European Union facing.
- The process of implementation of one world currency would be too complex. It will not allow any government to formulate monetary policy independently. Dependant monetary policy may not be as effective as with multiple currencies.
There is strong need of the one world currency but at present, it is not only subtle for many countries but also very difficult to implement worldwide. Due to a rise of the Chinese empire and global economic limitation for international trade, we might see a new form of international currency in future globalization.
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