RE-DEFINING GLOBAL CURRENCY MARKETS

It’s fascinating to re-visit our views with the benefit of hindsight, particularly with the current speed of transformation in global markets and systems. The following are extracts from an analysis drafted in 2012, which covers a number of elements relevant to the Australian and global economies. These issues are under constant review, and the introduction of multiple digital currencies in recent years is one of the key considerations in reviewing my views and the direction of our business activities. 

Part One

It’s time to simplify the financial structures across the world’s economies. We are now a global community, in need of financial systems which accommodate a rapidly changing economic and social environment. The benefits of technological developments are being restricted by legacy financial systems, customs and processes.

As every nation is becoming more multi-cultural, and economic and social interaction between countries is rapidly accelerating, we need to re-think the economic interaction between all financial markets on a global basis. This means adopting and embracing a new global financial structure.

Within the current global financial market, each country or group of countries adopts a currency based primarily on history and geography. This is out-dated and dangerous to the stability of global financial markets, as is presently being witnessed particularly in Europe.  

An extremely positive message which has been relayed by Europe is that currency does not define a country. A country is defined by its people, its customs, its history, its landscape, its resources, its character. A country is also defined by its political, economic, human and environmental credibility.

The last decade in Europe has proven the potential of multiple economies utilising a single currency. The last few years in particular have also clearly identified the flaw in a single currency valuation adopted across economies of different economic standing.

This dramatic case study lead us to consider solutions which were not merely short-term band-aids, but which offered a fresh and sustainable model for all the world’s economies, a model which recognised and embraced the extraordinary array of new technologies, and the potential they bring to the simplification of our daily lives. 

There is a simple but dramatic adjustment required  for the long term viability of financial markets, which can be applied (with some variations) to nations, local and regional governments, government departments, corporations, and organisations (collectively referred to as entities), and to individuals. This solution is a single global, but importantly multi-grade, currency. It is here that our concepts differ from both the traditional view of one currency per country (or region), and from the single global currency proposed by John Maynard Keynes and others.

A single, global, multi-grade currency, including.

  1. A single currency;
  2. Multiple currency exchange grades;
  3. Independent re-ranking of each entity on a monthly basis.

The formulae we use to classify and categorise must be universal, not within a nation or within a region, but across every continent, every economy, every entity and every individual on the planet. Rankings are also multi-faceted, much as the present systems, and include:

  1. Sovereign Debt – economic and political;
  2. Long-Term Debt – economic;
  3. Short-Term Debt – economic;
  4. Composite – economic, political, human, and environmental credibility.

This model re-allocates individuals and entities in regard to currency values and credit ranking, based on core financial and associated issues, not directly related to geography. 

Essentially our model creates a single currency with multiple grades. There is no need to print cash, as the currency is not offered in cash form. Re-grading is monthly and automated, the transaction market remains the same. When a Vietnamese company is importing from Mexico, the exchange will take place between their respective exchange rates.

BENEFITS FOR EUROPE

The Euro would immediately be declared an economic alliance, and not a currency alliance.

The current members of the European Union would be immediately re-structured in accordance with the model, in anticipation of the ultimate currency re-alignment. The new groupings would be as follows, assuming the adoption of current ratings agency assessments (NOTE: The following are as per 2012):

Group 1: Denmark, Finland, Germany, Netherlands, Sweden, United Kingdom
Group 2: Luxembourg
Group 3: Austria, Belgium, France
Group 4: Czech Republic, Estonia
Group 5: Latvia, Slovakia, Slovenia
Group 6: Ireland, Italy, Malta, Poland, Spain
Group 7: Bulgaria, Lithuania
Group 8: Cyprus, Hungary, Romania
Group 9: Portugal
Group 10: Nil
Group 11: Nil
Group 12: Nil
Group 13: Greece

Countries are re-graded on a monthly basis. Each Group operates as one block in relation to currency re-valuation or de-valuation, and the volume of currency. This will immediately enable countries such as Greece to de-value their currency and optimise the chances of survival for the European financial markets.

GLOBAL IMPACT

On a global scale, the former Euro Group 1 countries would be joined by Australia, Canada, Hong Kong, Liechtenstein, Norway, Singapore, and Switzerland.

The impact on world markets is a greater incentive towards co-operation, with economies in similar economic circumstances needing to collaborate to improve their respective and collective financial position. This structure also provides a means of insulating stronger performing economies from those in difficulty.

As an example of the global connectivity this system offers, an economic block would exist within Group 8 including Barbados, Cyprus, Hungary, India, Romania and Tunisia. This is not meant in any way to represent a political or even a social or trading alliance, merely a currency alliance, however we anticipate that the closer economic connection will cause an environment for improved economic and social interaction within each Group.

In an ideal world every economy would ultimately become a Grade 1 economy, and trading would be conducted on a level playing field globally. This should be the logical long-term objective of every nation and every government. Ultimately it is possible, as the development of poorer countries would be financed by wealthier countries until financial independence and ultimately equality was secured. Reality suggests that this will never occur, primarily because of the human condition, however the currency is structured to accommodate either scenario.

IMPACT ON THE BANKING SECTOR

Although there is a urgent need for global banking reform, the current banking sector can operate without any major changes under the new environment, the only significant variation is the introduction of the new/alternate currency regime, and the application of new exchange rates in new currency transactions. Participating countries would offer to replace the existing currency with the new global currency at the then relevant cross-rate.

IMPACT ON FOREIGN DEBT

This remains unchanged, foreign debt remains repayable in either the original currency or the converted currency based on the application of conversion parameters. The benefits to both the borrower and lender include the reduction in global financial risk given the improved financial stability under the new model.

IMPACT ON THE CASH MARKET

The cash market is removed, and the new currency is not available in cash form. Where internet access is unavailable, forms confirming transactions must be accompanied by the members card reference for both buyer and seller, a system currently deployed whenever access to the internet/server is unavailable.

A GLOBAL FINANCIAL REVOLUTION

This may be considered a revolutionary concept, despite the logic behind it and its simplicity of design. Like all successful revolutions, it must be driven by the people, one at a time, one group at a time, one community at a time, one nation at a time.

 

June 2012 (as amended)
© Reid Robertson Holdings Pty Ltd 2012-2019