The Zimbabwean government decided to fight fire with fire and printed even more money in higher denominations. Eventually, the country would produce a $100 trillion Zimbabwean dollar note, which had an exchange rate of about 30 U.S. dollars (USD) in January 2009. The government would go on to abandon its currency entirely, opting instead to adopt the U.S. dollar and South African rand as official currencies. But what about all those trillion-dollar notes that the country’s finance ministry produced in 2008? Zimbabwe shows how difficult it can be to keep track of how much money a single nation has in the global markets, let alone how much money there is in the world.
However, this inherent difficulty hasn’t stopped some from trying. Perhaps the closest estimate to how much money exists in the world was released in January 2009 by Mike Hewitt, editor of the economics blog DollarDaze.com. Hewitt tracked the reporting of 73 currencies from central banks and financial ministries in 90 countries, which cover the money used by 84.1 percent of the world’s population. The countries tracked represent 96.7 percent of the world gross domestic product, the market value of the world’s economies combined. Hewitt found that in October 2008, these countries had notes and coins equalling $3.94 trillion in U.S. dollars in circulation. Things would be a lot easier on Mike Hewitt and foreign exchange market analysts if there was only a single currency used by every country on the planet. So why don’t we?
Of course, the concept of a single worldwide currency has been suggested since the 16th century, and came close to being instituted after World War II yet the idea remains little more than that. We can even see what the EURO ZONE is facing in terms of having a single currency! Proponents argue that a universal currency would mean an end to currency crises like Zimbabwe’s. According to the views of a friend of mine who happens to be a Banker; a single currency wouldn’t be subject to exchange rate fluctuations because there would be no competing currencies to exchange against. In other words, a universal currency would lose its value as a commodity bought and sold on open markets and would have value only for its worth in buying other commodities. To put it plainly, money would become just money. Its purchasing power would be the result of the adjustment of interest rates and other monetary policy tools in response to inflation or deflation. I think the Bankers are worried of the losses that would result from
the lack of numerous currencies to exchange!
If you talk of interest rates, who would be responsible for adjusting those interest rates, though? One of the chief fears among opponents of a universal currency is the creation of a central body formed to oversee the monetary policy for a single world currency. An extant international body, the United Nations (UN), provides an example of the potential pitfalls and strength a central global monetary body could expect. Successes like peace-building missions in nations as disparate as El Salvador, Mozambique and the former Yugoslavia attest to the power a unified international body can have to resolve conflict. On the other side of the coin, the UN’s Intergovernmental Panel on Climate Change (IPCC) is widely accused of replacing science with diplomacy, as nations responsible for contributing to climate change aren’t openly taken to task in IPCC reports. These reasons and others continue to prevent the adoption of a universal currency. Perhaps closer on the horizon is the integration of separate currencies with
in regions into unified currencies. This has already occurred in some areas. The Euro is lauded as a successful regional currency and consistently trades at values above the dollar, despite being introduced only in 1999.
Eight West African nations share a common currency, the Franc of the African Financial Community (CFA F). In the Western hemisphere, the creation of the amero has been suggested as a possible currency for a proposed currency union between the U.S., Canada and Mexico. Central American nations are also discussing a single currency proposal for the region. Whether the proposed regional currencies will be instituted remains to be seen. They face the same criticism as a universal currency, albeit on to lesser degrees and on smaller, regional scales. In the meantime, while the debate over regional and universal currencies continues, people like Mike Hewitt will have to count money the old fashioned way. With the above in mind, it is getting increasingly difficult to tell with certainty the exact money volume in the world, but an estimate based on the US$ is about US$$3.94 trillion by 2008.