Goodbye U.S. dollar, hello global currency

by Benn Steil

The director of international economics at the Council of Foreign Relations has launched a scathing attack on sovereignty and national currencies.

Benn Steil, writing in the current issue of CFR's influential Foreign Affairs magazine, says "the world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn."

In the article, "The End of National Currency," Steil clearly asserts the dollar and the euro are temporary currencies, perhaps necessary today. He argues "economic development outside the process of globalization is no longer possible."

His inevitable conclusion is "countries should abandon monetary nationalism."

Steil tempers his embrace of one world currency, writing, "Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area."

He concludes: "It is the market that made the dollar into global money – and what the market giveth, the market can taketh away. If the tailors balk and the dollar falls, the market may privatize money on its own."

The "tailors" Steil has in mind are the world's central bankers. He advises that the U.S. needs "to perpetuate the sound money policies of former Federal Reserve chairmen Paul Volker and Alan Greenspan and return to long-term fiscal discipline." In our current era of large and growing trade imbalances and over $35 trillion in GAAP (Generally Accepted Accounting Principles) accounted federal deficits, these targets appear unlikely.

Steil concludes "the foreign tailors, with their massive and growing holdings of dollar debt" no longer feel "wealthy and secure" in the economic environment of a resultant falling dollar. The inevitable conclusion is that the dollar, too, may be on the way out.

Steil's essay is antagonistic to the ideas of sovereignty and national currencies.

He writes, "The right course is not to return to a mythical past of monetary sovereignty, with governments controlling local interest and exchange rates in blissful ignorance of the rest of the world. Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory."

Steil has ultimate confidence that economic globalism is irreversible, with national currencies doomed to the dustbin of history.

"In order to globalize safely," he advises, "countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today's instability."

Steil believes continued economic growth demands a global flow of capital unimpeded by the barriers inherent to "monetary nationalism." He asserts barriers created by monetary nationalism, such as national exchange rates or national monetary policy regimes, inevitably impede capital flow and cause currency crises as a consequence.

Steil fundamentally argues, "Monetary nationalism is simply incompatible with globalism."

Since Steil believes that only globalism offers the unrestrained flow of capital needed for worldwide economic development, he contends even re-establishing a gold standard would be counter-productive when the only real solution is to abandon the idea that nations have any reason to create currencies at all.

Throughout his analysis, Steil cautions that dependence upon the dollar or the euro as global currencies is not fundamental to his argument.

He stresses that "the dollar's privileged status as today's global money is not heaven-bestowed. The dollar is ultimately just another money supported only by faith that others will willingly accept it in the future in return for the same sort of valuable things it bought in the past."

In other words, if the institutions of the U.S. government fail to validate that faith, the dollar, too, merits being abandoned.

"Reckless U.S. fiscal policy is undermining the dollar's position even as the currency's role as a global money is expanding," he notes.

Steil imagines the ultimate solution is to privatize a global currency through a gold-based international monetary system.

"A new gold-based international monetary system surely sounds far-fetched," he concludes. "But so, in 1900 did a monetary system without gold. Modern technology makes a revival of gold money, through private gold banks, possible even without government support."

WND previously reported Steve Previs, a vice president at Jeffries International Ltd., in London, told CNBC Nov. 27, 2006, the amero "is the proposed new currency for the North American Community which is being developed right now between Canada, the U.S., and Mexico."

A video clip of the CNBC interview with Jeffries is now available for viewing at YouTube.com.

WND also has reported a continued slide in the value of the dollar on world currency markets could set up conditions in which the adoption of the amero as a North American currency gains momentum.

The amero was first proposed as a North American unitary currency by Canadian economist Herbert G. Grubel of the Fraser Institute in Vancouver, British Columbia.

In a publication entitled "The Case for the Amero," Grubel argued that a North American monetary union would eliminate the costs of currency trading and risk, furthering the development of a North American common market along the model of the European Common Market.

Robert Pastor, director of the Center for North American Studies at American University, supported Grubel's arguments for the amero.

In his 2001 book entitled Toward a North American Community, Pastor supported Grubel's suggestion that the creation of the amero would be accompanied by the creation of a Central Bank of North America, similar to the European Central Bank.

Grubel's argument on the amero has also been published as a book in Spanish, entitled El Amero: Una Moneda Comun para Améica del Norte, published by CIDAC (Centro de Investigación para el Desarrollo), the Center for Research for Development in Mexico.