What Is a Super Currency?
Super Currency
Forex & Currencies Trading Strategy & Education
By Will Kenton Updated September 02, 2021
What Is a Super Currency?
A super currency is a hypothetical global currency or supranational currency, that would be backed by a basket of reserve currencies at the International Monetary Fund (IMF), and form the basis for a new global monetary system. The idea has attracted new interest after the financial crisis, and it has been promoted by China and the rest of the BRICS (Brazil, Russia, India, China, and South Africa).
KEY TAKEAWAYS
A super currency refers to the concept of a global monetary system featuring an internationally-used currency.
The theory behind a super currency is that it can stabilize global financial and commercial transactions and promote economic stability around the world.
Despite several proposals for a functional super currency, the closest the world has ever come to one is the IMF's special drawing rights (SDRs), but these are only used by institutions.
Understanding a Super Currency
A super currency would replace the current U.S. dollar-dominated system, which some blame for the increasingly frequent global financial crises since the collapse in 1971 of the Bretton Woods system of fixed but adjustable exchange rates – because of its volatility. And many, like neo-Keynesian economist Joseph Stiglitz and investor George Soros, see it as a new direction for the development of the global economy.
Prior to that, economist John Maynard Keynes had proposed at Bretton Woods a supranational world currency known as Bancor as early as the 1940s as a way to promote global monetary stability, but this was rejected in favor of the gold-backed currency system. The Bancor currency would have been used in all international trade and to settle global financial transactions. The idea gained renewed interest following the 2008 global financial crisis but again failed to gain traction.
Replacing the U.S. Dollar System
In 2010, the United Nations Conference on Trade and Development called for a new global currency to replace the U.S. dollar as the world's dominant reserve currency. As envisaged, a greatly expanded special drawing rights (SDRs) at the IMF, with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, would be the basis for a global super currency that would contribute to “global stability, economic strength, and global equity."