The Specter of the Global Central Bank Returns: Are We Witnessing the Birth of a Single Global Currency?
Cairo: Hani Kamal El-Din
There is no World Central Bank yet. There is simply the World Bank, which was established after the Second World War according to the decisions of the Bretton Woods Conference in 1944. The World Bank has been and is engaged in issuing loans, but not issuing money. At the same time, the idea of creating exactly such a global institution that would be engaged in issuing a world currency has been in the air for a long time. Today, the role of world currencies is played by money that is national in its status. First of all, this is the US dollar, which is primarily a national currency, and concurrently plays the role of an international currency used as a means of payment and accumulation of reserves.
They say that in ancient times there was no national money. We are talking about the times when precious metals were used as money – gold and silver. Of course, even then, different states, and even appanage princes minted their own coins, which had their own unique names. Moreover, coins could be “damaged” (i.e. the metal content was less than the nominal value indicated on them). However, by weighing it was possible to determine the true weight of metal money. To paraphrase a well-known phrase, we can say: “Gold is gold, even in Africa.” Money became truly national when it turned into paper tokens. The classic of Marxism said that money was clothed in “national uniforms” (K. Marx. Towards a Critique of Political Economy. Section 1, Chapter 2 “Money, or Simple Circulation”). From that time on, considerable difficulties in trade really arose, since it was sometimes difficult to determine the real purchasing power of paper money. It was still more or less possible to use national paper money as a means of international payment at the time when the gold standard was in effect, since the emission of such tokens was tied to a precious metal. The gold standard began to “malfunction” in the 20th century. At first, due to the First World War, its operation was suspended. Then there were attempts to restore it in a truncated form (gold bullion and gold exchange), but due to the global economic crisis that began in 1929, it was also liquidated. France was the last to abandon the gold bullion standard in 1936.
It was then, in the 1930s, that the idea of creating a single currency for the entire world as a monetary sign not tied to a precious metal was born. The ideas of some economists at that time were too general in nature, resembling dreams and fantasies. But at the international monetary and financial conference in Bretton Woods exactly 80 years ago, this idea was voiced by the head of the English delegation, an official of the British treasury and a famous economist John Keynes (1883-1946). It was carefully worked out in 1940-42. in the English treasury with the participation of the English economist Ernst Friedrich Schumacher (1911-1977).
This was no longer a “project”, but a project. We are talking about the project of the post-war structure of the international monetary and financial system based on the world currency, which Keynes called “bancor”. The English economist proposed to use this currency for international payments and settlements, national money was not abolished. Moreover, Keynes emphasized that it was nothing more than a unit of account, something like a clearing currency intended to cover the balance of international settlements. The issue of bancor should be handled by the International Clearing House. This is an institution that already has the characteristics of a world Central Bank.
As is known, John Keynes’s project did not receive the necessary support at the conference. The participants of Bretton Woods voted for the American project of the gold-dollar standard. Which died a long time ago in the 1970s. The Bretton Woods system was replaced by the Jamaican system, based on a paper dollar standard.
The idea of a global supranational currency did not die out during the Jamaican system. Thus, Harvard University professor Richard Cooper (1934-2021) put forward the idea of a global central bank and currency at the Federal Reserve Conference in Bretton Woods, New Hampshire, in 1984, which was celebrated to mark the fortieth anniversary of when financial agreements for the post-war world were reached. Although at the time he admitted that “the idea is so far from being politically feasible at the present time – in its call for a real pooling of monetary sovereignty – that it will take many years of thought before people get used to the idea.”
At the very end of the last century, the European Central Bank was established, which began issuing a supranational currency, the euro. Some observers believed that the ECB and euro project was a pilot project. It would test the model of a supranational Central Bank.
regional scale. And after that, the project of a supranational Central Bank of global scope will begin to be implemented.
It would not be an exaggeration to say that it was the Jamaican system that provoked a whole series of crises, the most serious of which was the global financial crisis of 2008-2009. In turn, the aforementioned crisis sharply intensified discussions about Keynes’s project.
In November 2008, the English economist Jeffrey Garten published an article in Newsweek magazine, “We Need a Bank of the World” (Jeffrey E. Garten. We Need a Bank of the World // Newsweek. November 3, 2008). In it, he stated that the creation of any supranational institutions, especially those of global scope, causes resistance in society. Nevertheless, the establishment of such institutions, including a global central bank, is an objective necessity: “It is difficult to overestimate the political resistance that any formal proposal to create a global central bank would provoke among various constituencies, especially in the United States. Among their many accusations, critics will protest the creation of a “world government.” But we have the World Trade Organization with legally binding powers in trade disputes. We have the World Health Organization for infectious diseases, capable of isolating entire countries. And today, there is a functioning World Court, which has significant legal and moral influence.” I should note by the way that these words were written more than a decade and a half ago. During this time, people’s trust in various kinds of global organizations has fallen sharply. For some, almost to zero.
In a March 2009 speech titled “Reform the International Monetary System,” Zhou Xiaochuan, governor of the People’s Bank of China, called Keynes’s idea of a bancor “far-sighted” and proposed that the International Monetary Fund launch a large-scale issue of Special Drawing Rights (SDRs), a currency that would act as an analogue of the bancor.
On March 26, 2009, a group of UN economic experts called for a new global system of foreign exchange reserves to replace the current system based on the US dollar. The commission’s report stated that “a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted issuance calibrated to the size of accumulated reserves, could promote global stability, economic growth, and global equity.”
Early in the last decade, US Treasury Secretary Timothy Geithner (in office 2009-2013) expressed interest in the idea of expanding the use of SDRs as a reserve. He argued that a domestic currency was unsuitable as a global reserve currency because of the Triffin dilemma – the difficulty issuers of reserve currencies face in trying to simultaneously achieve their domestic monetary policy goals and meet the demand of other countries for a reserve currency. However, he was harshly criticized in the United States for this, since the Secretary’s proposals undermined the position of the US dollar as a global currency. For some reason, few people in America cared that the dollar as a global currency was undermining the position of the US economy.
However, there are economists and financiers who advocate doing without a global Central Bank, and increasing the stability of the global financial system through closer interaction between Central Banks, synchronizing their monetary policies and establishing cooperation in the form of organizing currency swaps. In other words, they actually advocated the creation of a cartel of national Central Banks.
It is easy to guess that the option of switching to a single currency (SDR) is intended to strengthen the position of the IMF. And the option of creating a cartel of Central Banks is intended to strengthen the position of the Bank for International Settlements, which I have already written about as the “conductor of Central Banks”.
I will give a brief background on the first option – SDR. The birth of this currency, little known to anyone, occurred on January 1, 1970. The Fund then issued a small amount of special drawing rights. Before 1972, there were two more issues. In 1970-1972, the IMF issued SDRs for a total of 9.3 billion units. This was the so-called “first allocation of the SDR”. Each SDR unit was equal to 1 US dollar.
The new currency was a very specific money. It was exclusively non-cash. The SDR issues were distributed among the member countries of the Fund in proportion to their shares in the IMF capital. The new currency could be provided in the form of loans from one member of the Fund to another, i.e. the SDR circulation could only be carried out through the accounts of the member countries of the Fund. The new currency was intended to help the member countries of the Fund, if necessary, correct their balance of payments and maintain the stability of their national currencies (fixed exchange rates are the cornerstone of the Bretton Woods system). The SDR monetary unit was unofficially called “paper gold”.
In the early 1970s, many expected that the SDR would
replaces the gold exchange standard, which was already bursting at the seams. But these expectations were not met. It was replaced by the paper dollar standard, which was recorded in the decisions of the Jamaican Conference of 1976. Nevertheless, the SDR was not forgotten in the Fund. In the period 1979-1981, the “second distribution of SDRs” (three emissions) took place, as a result of which an additional 12 billion SDR units appeared in the accounts of the Fund’s member countries (a total of 21.3 billion units). In September 2009, the total volume of SDRs reached 204.1 billion units. By this time, the SDR was no longer equal to the US dollar, but was more expensive than the latter. Therefore, in the equivalent of the American currency, the volume of accumulated SDRs was already equal to approximately $250 billion. According to the IMF, the total gold and foreign exchange reserves of all member countries of this organization at that time were equal to $7.771 billion. It turns out that at the end of the first decade of this century, the share of SDRs in the international reserves of the Fund’s member countries was approximately 3.2%. This is already a more noticeable presence of the new currency than before the financial crisis of 2008-2009 (then it was measured in fractions of one percent).
And so in August 2021, the last issue of SDRs took place – a record in its volume. Equivalent to the amount of $650 billion. The total volume of the supranational currency SDR today already amounts to an amount equivalent to approximately $1 trillion. This is almost 9% of all foreign exchange reserves of IMF member countries.
At that time, many observers were sure that a powerful financial “reset” had begun in the world, as a result of which the dollar would be vigorously replaced by the SDR. And the International Monetary Fund would gradually emancipate itself from the influence of member countries and transform into the World Central Bank (WCB), whose main function would be the issue of a supranational currency. It was also predicted that in parallel with the creation of the WCB, a world government would be created, which would receive a supranational currency from the WCB. The money would be directed to the implementation of projects covered by the “Great Reset” plan (let me remind you that this was the time of the so-called “covid pandemic”, the President of the World Economic Forum Klaus Schwab called this “pandemic” the beginning of the “Great Reset”, i.e. the restructuring of the world order).
Almost three years have passed since the time of the then record issue of SDRs. There have been no new issues since then. Apparently, something went wrong once again. The further transformation of the IMF into the World Central Bank has been suspended.
It seems that the initiative has been seized by the Bank for International Settlements, which has made the promotion of the development and implementation of central bank digital currencies (CBDC) its top priority. About a hundred central banks are studying the CBDC topic to one degree or another or are already implementing pilot projects; some have even legalized this new type of currency. Formally, central banks present their CBDCs as national currencies. But the BIS oversees the development of digital currencies of individual countries, achieving their full compatibility and convertibility of one currency into another. That is, these are CBDCs, which, in the words of Karl Marx, still have their “national uniforms.” But one fine day, all of them, on command from Basel (the BIS headquarters), may change into one “universal uniform.” And the BIS will receive the status of the world’s central bank, which will oversee the activities (primarily emission) of the central banks of individual countries. The latter will turn into branches of the world’s central bank. You can read more about this in the book: Katasonov V.Yu. Digital currencies: from bitcoin to CBDC. The owners of money want to become the owners of the world.
