Peaceful heat of exhausted dog-days fluttered around the Federal Reserve Board building on C Street, Washington, DC. It was noon and time for another monthly open-to-the- public "brown bag" seminar. Experience must have taught the organizers not to expect mobs thirsting for detailed research into the fine points of monetary economics. A small, main-level conference room -- big rectangular table in the middle, white board with neatly lined up colored markers -- served as the venue. I might have been the only one that day with a visitor's badge.
A dozen or so causally dressed and relaxed men and women (fairly young on average) -- PhDs employed by the Research Division of the Board of Governors of the Federal Reserve System -- file in and disperse around the table. Cellophane-wrapped sandwiches, small bags of potato chips, cans of soft drink. Every reason to be expectant. The year is 1999, we are just a few months before the introduction of the euro, and the speaker is a well known professor of money and banking from an Ivy League university. (I withhold names to protect the naïve and spare the university's fine shield from a chink.)
[...] financial assets just kept growing and the supply kept pace with it until the asymmetry built into the unipolar monetary system began to show its presence, allowing a glimpse into the mismatch between institutional practice cum prevalent thinking and exigencies of a broader, always evolving reality. What's the answer? Don't even risk the question! Development of a global money and central bank is the rational answer. But don't hold your breath. Nothing of the sort can happen before severe hardship serves as catalyst. [...]
[...] But quantitative asymmetry and divergence of interests and advantages between the pivot and the rest of the world will eventually tease out a breakdown. The following three points demonstrate that unipolar monetary systems come with expiration dates even if these remain invisible and unpredictable. The limitations and stickiness of structural changes. Complementary structural transformations incited and facilitated by the international monetary system in the pivot and the rest of the world, respectively like all processes that are subject to constraints must have an economic rationale-dictated end. [...]
[...] Let us remember, the vast majority of the world population is desperately poor and would be happy to go along for a ride of export-led economic development with the help of capital inflows. The only way world finances can move toward equilibrium is for the role of the dollar to decline. By our definition, this would signal the end of the current unipolar monetary system. system exists as long as the dominant currency it features increases or at least retains its role.) Thus, increase and decline in the use of the dominant currency is part and parcel of any conceivable unipolar monetary arrangement's life-time career. [...]
[...] The central bank of the recently established South American Community of Nations, comprising member states of the Mercosur (Brazil, Argentina, Uruguay, and Paraguay) and the Andean Community, is tasked to work out guidelines for a European-style monetary union with the establishment of a single currency for the whole of South America as final goal. In the course of pan-American free trade negotiations, the idea of single currency for the entire American continent has also emerged. Similar thoughts and intentions some tentative, others more concrete may be seen around the globe. [...]
[...] Psychologically and politically the world is far from instituting regional monies, let alone forming a global monetary union. Deleterious experiences, false starts, big surprises and much pain separate the present mindset from the one compatible with a monetary system one of the most essential aspects of global institutions that corresponds to the planet's physical (ecological and material resource) limitations. This is neither a philippic against the prevalent economic ideology, government policies, multilateral agencies, and cosmopolitan fat-cat financial hooligan-esquires nor a jeremiad about human nature. [...]
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