T5 Adapters — Calex Global

The recession and financial crisis seem to be galvanising discussions of alternative currencies at global, regional and local levels. We may be seeing the emergence of a consolidated ‘supra-national currency’ at a global level, fragmentation and parallel multiple currencies at local levels and in electronic worlds. The aim is greater stability, the result may be more radical change than we expect.

What is changing?

At the G20 meeting in April this year the development of an international currency based on the IMF’s Special Drawing Rights to replace the US dollar as the ‘global’ reserve currency was raised in order to increase stability. It had the support of China, Brazil and Russia (along with various ‘globalist’ finance experts) who for a variety of financial and political reasons want to reduce their dependence on the dollar, which in the wake of the crisis is seen as vulnerable.

China has also suggested turning the Renminbi (or Yuan) into a regional currency in East Asia to create a more balanced global triangle of Dollar, Euro and Renminbi. The recently signed trade agreement in East Asia may reinforce a move in that direction. China and Brazil are also discussing using the Yuan to express their bilateral trade, instead of the dollar; Russia suggesting that trade in her oil supplies be accounted for in Roubles.

Other forms of payment locally and in electronic worlds are also emerging or re-emerging as people’s faith in banks and other financial institutions falters. Store based loyalty card points and Air-miles are probably the most familiar and widespread forms of ‘alternative ways of paying’. But other alternatives are growing in number: Second Life has created an alternative international currency for use within its ‘borders’; mobile phone users are given free air time in return for watching advertisements; Local Area Trading Schemes and time-banks have emerged again as a way of helping local economies where jobs are in short supply, but time and skills can be traded; m-payment by mobile phone is increasingly popular especially in Africa and other developing economies where personal banking is very under developed, and provides an alternative way to access and transfer your ‘currency’, in small amounts.

Why is this important?

Currencies developed as a means of providing ‘common tender’ so that people could trade, but also governments could govern, raise taxes etc. Political influence therefore goes with currency control. Could we see the emergence of an international political framework through which a global currency was controlled? Given the ineffectiveness at times of the UN and EU at achieving international agreement, might this be a recipe for further instability rather than the stability it is meant to provide?

The emergence of the Renmibi as a regional currency on a par with the Dollar or the Euro could hasten the shift of economic influence to the Eastern economies and strengthen the move to a multi-polar world. Such a regional currency might also force fundamental changes within and opening up of China’s own financial system. China’s willingness to express such views is an indicator of that potential influence; as is Brazil’s and Russia’s.

The emergence of new ways of paying for things with mobile phones and online schemes means that local schemes, or special interest schemes, become more feasible. If local businesses become active partners in local trading schemes and alternative currencies are widespread, could we see an apparent fall in conventional measures of economic performance and tax revenue as many small parts of the whole become ‘invisible’ to the system of national accounts – with attendant knock on effects to ‘formal’ currencies – national or global? Might that also increase the potential for the grey economy to flourish? In ageing societies, where older people may need to work longer but face little opportunity to do so, would such schemes provide an essential lifeline in local communities and enhance local activism and identity? Would such schemes enhance local activism and more sustainable, low carbon lifestyles based around communities?

While the ‘international currency’ may not emerge, simply questioning to this degree the role of the dollar as the global reserve currency is indicative of momentous changes afoot. Coupled with local and electronic alternatives, changing how the financial system works and is regulated may go further than we expect.

This entry was posted on Friday, June 26th, 2009 at 12:19 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.