DEAD END OF THE WORLD PAPER-MONEY UNION

The Ethics of Money Production, JÖRG GUIDO HÜLSMAN:

"As we have seen, there is a strong tendency for the formation of currency blocks around the paper monies used in the countries with the largest capital markets. The driving force in this process is the quest of foreign governments for additional revenue. The governments that control the large capital markets have little incentive to adopt the currencies controlled by other governments. But governments that control only a small tax base and cannot tame their appetite for more money must at some point turn to international capital markets; and this sooner or later forces them to adopt a foreign paper money, or to merge its paper money with the paper monies controlled by other governments.

We have also seen that the connectivity between international capital markets creates an incentive for competing standard paper-money producers to cooperate and, eventually, to merge. This consolidation and centralization process is at present far from being completed. Today’s international monetary order is an order in transition. (...)

There would then be just one paper money for the entire world, possibly with a few remaining national paper currencies that serve as money certificates for the global money. The great project that Lord Keynes unsuccessfully promoted at the 1944 Bretton Woods conference would then finally have come true.

We have already pointed out all essential implications of such an event. Even a national paper money is a powerful engine of economic, cultural, and spiritual degradation. How much more would this be the case with a global paper money? Such a monetary regime would provide the economic foundation of a totalitarian nightmare.

It is true that we are still far away from this scenario. Great obstacles stand in its way, because it would require no less than a political unification of mankind.

But let us assume for the moment that these problems could be overcome in the near future. And let us also assume that fears of totalitarianism could be dispelled by an appropriate moral education of political leaders, who would then excel in the art of selfrestraint.

Would this solve the problem of monetary constitution? Would it give the world a true monetary order that did not bear in its very bosom a tendency for self-destruction, a tendency inherent in all fiat monetary systems?

In light of our general discussion of paper money, the answer is patent. All paper-money systems, be they national or international, labor under the presence of moral hazard. In the long run, therefore, a global paper money cannot evade the fate of national paper money. It must either collapse in hyperinflation or force the government to adopt a policy of increasing control, and eventually total control, over all economic resources. Both scenarios entail economic disruptions on a scale that we can barely imagine today. The inevitable result would be death for many hundreds of millions of human beings.

There is hope, however. Mankind is free to return at any time to the natural production of money, which is in fact the only ethically justifiable and economically viable monetary
order."