One World, One Currency: Could It Work?

By Eric Fontinelle Updated July 05, 2021   Reviewed By Michael J Boyle  Fact Checked By Suzanne Kvilhaug

The idea of a world currency is certainly not a new one. In 1969, the International Monetary Fund (IMF) created the Special Drawing Rights (SDR) as a supplementary global reserve asset. The SDR's value is based on a basket of five currencies: the U.S. dollar, the Japanese yen, the euro, the British pound sterling, and the Chinese renminbi.1

While the SDR is not a currency in the classic sense, it does serve the purpose of supplementing member countries' official currency reserves and providing liquidity during times of economic distress. According to the IMF's Articles of Agreement, the SDR was intended to be "the principal reserve asset in the international monetary system."2 

One of the most frequently cited backers of a single currency is the legendary economist, John Maynard Keynes. Many of Keynes' ideas have moved in and out of favor over the past 70 years. But could one global currency really work?

KEY TAKEAWAYS

The idea of a global currency is not a new one—the International Monetary Fund (IMF) created the Special Drawing Rights (SDR) in 1969 as a global reserve asset to supplement member countries' reserves.1

Among the benefits of a global currency would be the elimination of currency risk and conversion costs in international trade and finance.

Economically developing nations would benefit from a stable currency and the removal of currency barriers, which would lead to increased trade among nations.

A global currency could have several disadvantages, such as precluding nations from using monetary policy to regulate their economies and stimulate economic growth.

Because monetary policy could not be enacted on a country-by-country basis, it would have to be implemented at a global level, which could lead to monetary policy decisions that benefit some countries at the expense of others.

Who Would Benefit?

There would be a little something for everyone with a global currency. All nations would certainly benefit since there would no longer be currency risk in international trade. Traders would no longer have to hedge their positions in fear of currency fluctuations.

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