Global Trade

 

Money, Money

A mark, a yen, a buck or a pound
A buck or a yen
A buck or a pound.
Is all that makes the world go around
That clinking, clanking sound
Can make the world go 'round

Or maybe a Bancor?

The United States has a fiat currency.  The role of the US Treasury is to ensure that its fiat currency accommodates all economic transactions in the United States..  The US economy is just over $23 trillion.  To accommodate these transactions then the total US Dollar, USD in circulation, should be  $23 trillion.  But these are not the only economic transactions that use the USD.  Global Trade is $32 trillion and 50% of that amount is invoiced in USD.  Thus, arguably, the dollars in circulation should be equal to $23 trillion PLUS 50% of $32 trillion, or $39 trillion.  If the USD in Global Trade remained in Global Trade, this may not be a problem.  But the persistent inflation since the US Dollars in international trading were taken off the gold standard by the 1971 Nixon Shock, might be due to international USD competing with domestic USD for the same goods. Global Trade has increased by 8% a year since 1975, the founding of the World Trade Organization. Because the US Dollars in circulation do not consider this increase in demand, I would suggest this growth also might explain  the persistent increase in inflation since 1971. The Year Over Year inflation might have declined since the rates in the 1970s, but because the economic transactions requiring the USD have not been properly considered, is IMHO why we have currency inflation greater than 0%.

Another major currency used in International Trade is the Euro.  Arguably the recent economic crises in Greece and Italy could have been  resolved more quickly, if there was an International Currency that was NOT the Euro, and there were still national currencies.  IOW, Keynes was correct all along.  Bring back the Drachma, and Lira and make the Bancor, not the USD or the Euro, the international trading currency.