The US dollar and the euro are not true international currencies, but the currencies of the United States and the Euro Area that are “adopted” into international currencies. Because the world does not yet have an international currency. Meanwhile, economic actors need transaction tools between countries. Then those currencies of the richest countries and regions in the world are adopted as an international currency. This makes the world economy lame from the very beginning. Some countries print money while others buy it. Consequently, the US and the Euro can obtain resources from all corners of the world just simply by printing money from papers. They buy gold with paper. On the other hand, all countries in the world buy paper with gold. Trillions of US dollars of real resources and wealth flow from all corners of the world to countries that own international currencies, free of charge, over decades.
To overcome the problem, the Global Currency Initiative pioneered a fully democratic international currency system. It’s called an “organic system”. The organic system is an international currency system that is jointly developed by all countries in the world, or member countries, and becomes part of their respective national currencies. The organic system issues an international payment instrument called organic currency. Organic currency is only used for transactions between member countries. While domestic transactions continue to use their respective national currencies. The relationship between international and national currencies is organic (part of) and hybrid (interconvertible). The organic system is entirely digital, using (semi) automation and (semi) decentralized technology.
The organic system is a complete package. It provides FX reserves for free, maintains the balance sheet between countries under all conditions, stops trade wars, eliminates the “cheap competition”, releases countries in the world from the bondage of foreign debt and foreign ownership, makes the system balanced and stable, and finally lift the currency crisis to its roots. The organic system uses fully flexible exchange rates so it does not require economic integration. Thus, all countries in the world, in principle, can join, without overhauling the monetary system, without losing their national currency, national identity, and sovereignty. The organic system can also start on a small scale such as ASEAN, South Asia, East Asia, Middle East, Latin America, East Africa, West, Central, and other regions. It can also start on a combination of several regions. The region(s) that start(s) then built(s) the world central bank which is managed together in a (semi) decentralized manner. Other countries may join later. Every country in the world is free to choose whether to join the organic system or remain in the current system. Because the essence of democracy is to provide choices.
Problems of the International Economy
1. Buy paper with gold
Our world’s financial system has been lame from the very beginning. Some countries print international currency and other countries buy the money. Countries that print money can buy anything from all over the world with just a piece of paper. They buy gold with paper. On the other hand, all countries in the world buy paper with gold.
From IMF data, as of 2021, the total foreign currency held worldwide reaches 11.7 trillion US dollars equivalent. This means that the total real resources and wealth sent “for free” by all countries in the world to countries that own international currencies reached 11.7 trillion US dollars. All countries in the world “donate” their resources and wealth for free to countries that own international currencies of 11.7 trillion dollars for decades. This is a very large number and is a major source of inequality between countries globally.
2. Wasteful foreign exchange reserves
Foreign exchange (FX) reserves are the country’s wallets that contain international currencies and assets. FX reserves aim to meet the needs of international transactions and economic defense.
FX reserves are unproductive and wasteful assets because people do not use them for domestic transactions. FX reserves do not drive the domestic economy. While the cost is very expensive. In countries with trade deficits or slight surpluses, FX reserves come from foreign debt-bearing interest. Meanwhile, in countries with large surpluses, FX reserves are purchased by the state using domestic debt with higher interest rates. The cost of accumulating FX reserves is very expensive, for both surplus and deficit countries. Developing countries spend an average of 1% of their GDP on maintaining FX reserves.
3. International money depreciation: the “donation of the poor to the rich”
Under normal conditions, all international currencies shrink an average of 2% per year. The reason is that the country that owns the currency makes a deficit policy, namely “spending more than income”. The government goes into debt and prints new money to cover the shortfall. As a result, the currency shrinks or decreases in value.
Half of the US dollar notes circulate outside the US. This means that half of the US budget deficit is “financed” by all countries in the world. One-fifth of the euro notes circulate outside the Euro Area. This means that one-fifth of the Euro budget deficit is “financed” by all countries in the world.
With a total world FX reserves of 11.7 trillion US dollars equivalent, the worldwide “donations” to the owners of international currencies totals more than 200 billion dollars per year; 60% goes to the US, 20% goes to the Euro, and the rest goes to Japan, UK, etc. This means that all countries in the world, including developing and poor countries where some of the population is starving donate the richest countries in the world more than 200 billion dollars per year.
4. Global-scale trade war
The nature of trade is perfect reciprocity. Behind every sale, there is always a purchase. If in a market the traders sell 1 million US dollars, it means that buyers spend 1 million US dollars too. Behind every surplus country, there are must be deficit countries. It is impossible for everyone to be in surplus.
As all countries pursue surpluses and avoid deficits, naturally a “mass trade war” ensued. All countries in the world that conduct international trade are involved in this mass trade war.
The current trade war between the US and China is only the “tip of the iceberg” that is on the surface. Underneath, there is a real mass trade war involving all the countries of the world.
The mass trade war gave birth to the phenomenon of cheap competition between countries. They sell goods cheaply abroad to pursue a surplus and avoid a deficit. In a trade war, the countries of the world are like a stack of wood in a fire.
5. Cheap competition
The trade war causes countries in the world trapped in cheap competition. To sell cheap goods abroad, they lowered the minimum wage, lowered taxes on foreign companies, and lowered environmental standards. They are trapped in cheap competition for the sake of trade and to attract foreign investment. This phenomenon is known as the race to the bottom and trapped at the bottom.
The cheap competition causes losses on a different spectrum. The winning countries suffer some losses. While the losing countries suffered great losses. The losing countries end up trapped in unpaid foreign debts and there is no plan to pay them off. Their economic growth slowed down.
The most striking indicators of the cheap competition are slowing economic growth, rising inequality, and environmental degradation.
6. Foreign debt trap
When international trade increases, FX reserves must also increase. The need for FX reserves always increases following the increase in international trade. Meanwhile, the original source of FX reserves is the trade surplus. Then there was a struggle for a global trade surplus or a trade war as mentioned above.
In trade, it is impossible for all countries to have a surplus. There must be a deficit country so that other countries can surplus. The result is that 1/3 of the world’s countries have a surplus, the rest, 2/3 are in deficit.
Deficit countries then seek foreign debt to surplus countries or to countries that own international currencies. Debt has interest costs that must be paid in the future. In this way, these countries are finally trapped in foreign debt that “can never be paid and are not planned to be paid”. They are trapped at eternal global loan sharks.
7. Middle-income trap
In almost all developing countries, their economic growth has slowed down. It is very hard to become a rich country. They are caught in the “middle-income trap”.
In current trade, a competitive country can exploit the market of other less competitive countries and become a rich country in that way. Meanwhile, the exploited countries have slowed down. They remain in the runaway.
In fact, due to the cheap competition as described above, most winning countries are also slowing down. To become rich countries, developing countries are jostling through a narrow road. Almost all of them are stuck in that narrow road.
8. Global imbalances
Our current international currency system is not symmetrical. Some countries print money while others buy the money. This creates a permanent global imbalance. Countries that print the international currency must have a large deficit while the user countries must have a surplus.
An inaccurate exchange rate system also causes imbalances between countries that use international currencies. A small number of countries have very large surpluses and the rest are in deficit.
Deficit countries end up trapped in unpaid foreign debt. Their economy became unstable. They are like a tilted ship. The whole system is ultimately unstable. The trend of imbalance is always increasing globally. Global imbalance is fertile ground for a currency crisis.
9. Fluctuation and instability
The exchange rate between currencies around the world fluctuates. Fluctuations increase transaction and business costs between countries, increase the risk of uncertainty, and destabilize the entire system.
The main cause of exchange rate fluctuations is speculative transactions that dominate money markets around the world. The size of the current speculation is about 99% of all transactions in the money market with an ever-growing trend. Thus, the trend of instability also increases. Our international economy is becoming more and more unstable. Speculation is the triggering factor of a currency crisis.
10. Currency crisis
The currency crisis is like an earthquake. When the energy of imbalances continues to increase and the economic structure is unable to withstand it, then one of the structures breaks, releasing energy, and a crisis occurs.
Amid imbalance, speculation becomes an active triggering factor and tends to be self-fulfilling. Speculation can make the crisis happen earlier when the economic structure is still strong.
Internal imbalances give rise to a financial crisis. External imbalance gave birth to a currency crisis. Both can escalate into an economic crisis. For countries that use international currencies, both currency and financial crises have the same outcome.
As the trend of imbalance and speculation increases, the crisis trend also increases. Until now, the crisis has had no cure.
An Organic System
To solve all the international economic problems above, we designed a new brand of an international monetary system. Its name is an organic system. The organic system is a complete package. It can solve almost all of the above international economic problems comprehensively and permanently.
1. Simple definition
The organic system is an international currency system that is jointly developed by all countries in the world, or member countries, and becomes part of their respective national currencies. The organic system issues international payment tools called organic currency. The organic currency is only for international transactions between member countries. Domestic transactions continue to use their respective national currencies. The relationship between international and national currencies is organic (to be part) and hybrid (interconvertible). The exchange rate between the organic currency and the national currency uses an “auto-balancing” system that fully follows the fundamentals. The organic system is digital, automated, and decentralized.
The difference with the US dollar
The US dollar is created and controlled by the US government. Countries in the world only buy and cannot control. Meanwhile, the organic currency is created and controlled by all member countries. Member countries do not need to buy. They get an allocation for free.
Difference with euro
The euro is a single currency. There is only one currency in the entire region. There is no national currency. Meanwhile, the organic currency coexists with the national currencies of all member countries.
The euro is created and controlled by the Euro countries. Countries in the world only buy and cannot control. While the organic currency is created and controlled by all member countries around the world.
Member countries establish an international body, for example, the United Nations of International Monetary (UNIM). Ideally, UNIM is under the auspices of the United Nations. UNIM then founds the World Central Bank (WCB) and oversees its journey. The WCB runs the entire system and is responsible to UNIM.
The WCB has a representative office in each member country called the World Central Bank National (WCBN). The WCBN cooperates with the National Central Bank (NCB) of each member country. Each WCBN and NCB operates at least one supercomputer. The supercomputers are the cores of the decentralized system.
Member countries’ contributions finance the operating costs of the entire system, proportionately based on the use of organic currency in each country.
3. Democracy and symmetry
All member states create, control, and utilize the organic system democratically. The organic system is active. It protects the monetary systems of all member countries. The organic currency is distributed to member countries based on international transaction needs, free of charge. The voting rights are proportional and dynamic based on the use of organic currency in each country. Membership is open to all countries in the world without economic integration requirements. The organic system is completely symmetrical. All member states are equal. All national currencies are also equal.
4. Organic and hybrid
The organic currency does not stand alone and is not a foreign currency. Instead, it becomes part of the national currency of each member country. Each unit of organic currency is guaranteed by the national currency. Therefore, it does not require gold collateral and other international assets.
Organic and national currencies are hybrid. They can be converted from one to another without spreads and do not affect the price (exchange rate). For example, if the purchase price of the organic currency in China is 10 yuan per unit, then the selling price is also 10 yuan. There is no money exchange fee. The exchange of money also does not affect the exchange rate, regardless of the amount. Because the exchange rate only follows economic fundamentals.
The value of the organic currency is anchored to the global price index so that its value does not change or has zero depreciation and zero appreciation. Thus, the value of the organic currency is “super stable”, does not change both in the short and long term, more stable than all types of currencies that have ever existed in the world, including gold.
6. Distribution to the national central bank
- All member countries receive an allocation of organic currency in the “ideal amount”. The ideal amount is determined based on the needs of international transactions and agreements, for example, 3 months of trading.
- The ideal amount is not a quota. It is only a benchmark. This means that member countries can still get a larger allocation than the ideal amount.
- The use of organic money that is greater than the ideal amount is detrimental to the country itself.
- WCBN then sends organic currency to NCB in the ideal amount mentioned above.
- As collateral, NCB sends the national currency to WCBN.
- The amount of collateral is always the same as the organic currency. If the national currency depreciates against the organic currency, then NCB sends the shortfall to WCBN so that the value is the same again.
- On the contrary, when the national currency appreciates against the organic currency, then WCBN returns the excess to NCB so that the value is the same again.
7. Distribution to the public and control system
People who need organic money for transactions between member countries can buy directly from the central bank with the national currency.
The proceeds from the sale (seigniorage) become government revenue.
People who no longer need organic money can directly sell it to the central bank.
Purchase costs (negative seigniorage) become government expenditures.
When the amount of organic currency in circulation is within the “ideal amount”, then the control is left to the market. No intervention is required. Therefore, the central bank only accepts purchases and sales from the public.
When the amount of organic currency in circulation exceeds the “ideal amount”, the government exercises active control. Active control can be in the form of regulation or “taxation of storing organic currency”. Tax revenues become the revenue of each country.
We call this a “direct control system”. It does not require an interest rate at the central bank or government. This means that there is no central bank or government interest rate in organic currency (zero interest rate).
8. Digital, automation, and decentralization
To maximize functionality, the organic currency is digital, using automated or semi-automated, and decentralized technologies. Digital currency is a currency that is “printed”, stored, and managed in the form of a “digital code”. Automation is a process or technology that runs on its own without human intervention or with minimum supervision. A decentralized system is a system that operates with many cores so that it does not depend on one particular center.
The advantage of decentralization is that the system remains fully functional even if some parts or cores are disrupted or damaged. All member states are organizationally the core. All supercomputers run by each country are technically the core.
Organizationally, member states are the core. The WCB, WCBNs, and NCBs are the cores. They are all equal. Then, technically, all supercomputers run by WCBN and NCB in each member country are cores. One country runs at least two units or more.
All supercomputers are connected to the main network called the backbone. The main network is an internet network, exclusive or inclusive.
The public, commercial banks, financial institutions, enterprises, and all equipment connected to the main network to obtain services are clients. Clients can access services in organic systems through the backbone.
The main services available to the public are account, transfer, payments, and money exchange. Since the contributions of member countries finance the operation of the system as mentioned above, all the main services are free of charge. This makes transfers, money exchanges, and international payments very efficient.
9. Auto-balancing exchange rate
Currently, there are two types of exchange rates in the world, namely fixed and floating. Both often show incorrect exchange rates. As a result, the international economy is distorted. There is an imbalance, disharmony, and finally instability.
The organic system does not use the two exchange rates above. The organic system uses its own, highly accurate exchange rate, which is called an “auto-balancing” exchange rate so that the international economy is not distorted. In doing so, two parameters are used. First, price parity based on the basic law of trade. Second, a neutral external balance sheet, neither a surplus nor a deficit.
The auto-balancing exchange rate is set when the average price of domestic goods that can be exported is the same as in the international market and when the external balance sheet is neutral neither surplus nor deficit.
The implications of the auto-balancing exchange rate are:
1. The competitiveness of trade and investment of all countries are balanced or neutral.
2. Trade of all countries tends to be balanced, with no excessive surplus or excessive deficit.
3. The foreign (external) balance sheet of all countries tends to be neutral, not in excessive deficit or surplus.
4. The external (global) imbalance between countries can be completely eliminated.
5. Coherence and efficiency of the international economy take shape naturally.
10. Flexibility and Stability
The auto-balancing exchange rate fully follows the economic fundamentals of each member country. The impurity factor does not affect the exchange rate. There is no variance between exchange rates and fundamentals. The exchange rate becomes completely stable.
Solve the Problems
The organic system is a complete package. It returns the monetary aspect to its natural position, which completely follows the fundamentals. The monetary and economy are symmetrical. In that way, the organic system can comprehensively solve almost all problems in the international economy as mentioned above.
1. Free international currency for all countries
In a democratic system, anything that is made at no cost can, in principle, be distributed to all members free of charge. And so the international currency. Member countries can create a common international currency at almost no cost and distribute it to all member countries free of charge.
The organic system is completely democratic. This system can create international currency at almost no cost and distribute it to all member countries based on international transaction needs for free. They no longer need to buy international currency or borrow from other countries as it is now. The organic system provides free international currency to all member countries whatever is needed.
2. Free FX Reserves
The system provides free FX reserves. Member countries do not need to fight over trade surpluses and do not need foreign debt to build FX reserves. Because the system has provided it.
Currently, developing countries spend an average of 1% of their GDP to build and maintain FX reserves. In the organic system, these costs are no longer necessary. The system provides FX reserves and maintains them for free.
3. Undepreciated international currency
The organic currency is completely stable, not depreciating nor appreciating at all. The value of the organic currency will remain the same in the next 10 or 100 years. There is no inflation or deflation in the organic system.
Thus, the “contributions of the poor” to “the rich” in the form of depreciation of international currencies no longer exist. All countries are equal.
4. Eliminate Trade Wars
Since the system provides FX reserves to all member countries free of charge, they do not need to pursue a trade surplus. Then, with the automatic balancing exchange rate, the trade competitiveness of all countries is fully balanced. Therefore, trade tends to be balanced, not in surplus and not in deficit.
With the two conditions above, the trade war does not exist nor is it relevant. International trade became fully coherent. Comparative advantage in the standard theory of international economics takes shape naturally.
5. Eliminate cheap competition
Since trade is balanced, there is no cheap competition motive. When the trade balances, the investment follows. No unhealthy competition for foreign investment exists. The state does not need to lower labor wages, lower taxes on foreign companies, and lower environmental standards for the sake of competitive trade and investment. There is no motive for unfair competition. So, the international economy naturally forms a mutualism relationship.
6. Pay off foreign debt
Since the system provides FX reserves and trade tends to be balanced, the government does not need foreign debt. Foreign debt for the private sector may still be necessary with a fair business model. However, government foreign debt is completely irrelevant and useless. More than that, the government can pay it off. The organic system can pay off the foreign debt of all governments in the world regardless of the amount.
7. Overcoming the middle-income trap
Without trade wars, exploitation of trade, and cheap competition, the external factors that cause the middle-income trap (MIT) can also be eliminated. Three external factors that cause MIT, namely trade exploitation, cheap competition, and expensive FX reserves, can all be eliminated. In the organic system, middle-income countries do not compete in a narrow and jostling road. They have their own path. They can grow faster.
8. Erasing global imbalances
The organic system is symmetrical. The auto-balancing exchange rate makes the balance sheet of all countries balanced. In this way, the organic system completely roots out the global imbalances. No country has an excessive surplus or deficit. No country controls the assets of other countries excessively. No country whose domestic assets are controlled by foreigners excessively too. The organic system can naturally decompose the excessive foreign ownership in every country. With a balanced external balance sheet of all countries, the global economy naturally becomes more stable.
9. Eliminating fluctuations and instability
The auto-balancing exchange rate keeps the exchange rate fully stable following the fundamentals. No fluctuation and no variance in the exchange rate. The exchange rate is a mirror of the fundamentals. Noise transactions or speculations do not affect exchange rates. Then the speculation will disappear by itself. Naturally, the international monetary system becomes more stable.
10. Lifting the currency crisis
With the disappearance of global imbalances and speculation, the organic system removes the currency crisis from its roots. In the organic system, in theory, there is no currency crisis.
Can Start Anywhere and Be Initiated By Anyone
Dozens of global currency ideas or initiatives have appeared in the world for decades. However, all stopped. Two big factors are stopping them all, namely the “economic integration requirement” and the “agreement of the top of the pyramid”.
First, economic integration
Building a common currency like the euro requires comprehensive economic integration. If these requirements are not met, then combining currencies can cause imbalances. The result can be fatal. The countries suffer more losses than gains. Meanwhile, achieving comprehensive economic integration is not easy. From various research results, there is no single region in the world that currently fulfills these requirements better than the Euro and the US. So building a common currency like the euro model is very difficult.
The organic system does not require comprehensive economic integration at all. The reason is that the organic system uses fully flexible exchange rates. Thus, all countries can join on their condition as they are. The organic system can start anywhere in the world and all countries may join without requiring comprehensive economic integration.
Second, the agreement of the top of the pyramid
The idea of a global or international currency has been around for decades. At the Bretton Woods conference in 1944, the Father of Modern Economics, John Maynard Keynes, proposed the Bancor. As far as we know, Bancor is the first and most comprehensive idea about common international currency. After Keynes, dozens of other ideas emerged. All those ideas stopped because the United States does not approve. It is noted that the US is the most important player in the world. It is the owner of the most dominant international currency, the US dollar. The US is the top of the pyramid. When the US did not agree, then the idea immediately hit a great wall.
The problem is that all notions of global or international currency can only work if it gets the approval and support of the main player countries, namely the owners of international currencies (the US and the Euro) and the countries with the largest trade surpluses (China and Japan). The idea of a global currency can only work if all the major player countries or the “top of the pyramid” sit at one table and share very basic interests. While we all know that, it is impossible; at least in the foreseeable future.
The organic system works differently. The organic system can start on a small or large scale and can function normally regardless of the number of members. Thus, the organic model can start anywhere and regardless of the number of members without requiring the approval or agreement of the “top of the pyramid countries”. Of course, the agreement or support of the top of the pyramid is very essential and helpful. But, it is not mandatory if they do not agree. The show can just go on.
With the two characteristics above, namely that, it does not require economic integration and does not require the cooperation of all countries, but only countries that support it, the organic system is free from the “global monetary cartel”. The organic system can start anywhere and can be pioneered by any country or region around the world. Even with a small number of members, for example, ASEAN countries, East Asia, South Asia, Middle East, West Africa, East Africa, Central Africa, Latin America, and so on, the organic system can function normally. Furthermore, the system can be open to all countries in the world. All countries may join later. Without the requirements of economic integration, without losing the national currency, the organic union will grow naturally. It will roll like a snowball. In the end, all countries will join.
Bringing the Idea to Life
1. Global currency initiative
Everything starts with an idea. The Global Currency Initiative (GCI) is the capitalization of the idea of the organic system. The goal is to bring the idea to life, to build a shared international currency and world central bank that is democratically managed by all countries in the world. To achieve this goal, the initiative has made the following pilot programs:
- Research and development of models, theories, and technologies in economics, monetary, information, international relations, and other fields as needed;
- Inviting local government to get involved.
GCI is an open research body and non-profit. This means that everyone can make the same initiative anywhere in the world. The initiative is decentralized. Each initiative established in each country is independent and coordinates with each other.
2. United Nations of International Monetary (UNIM)
After getting involved, the supporting governments form an official inter-governmental organization, for example, the United Nations of International Monetary (UNIM). Ideally, UNIM is under the auspices of the United Nations and coordinates with the IMF.
UNIM membership is voluntary and open. All countries may join. The voting rights of each country are based on the size of international transactions with fellow member countries. UNIM’s main task is to establish a world central bank and prepare all the necessary regulations.
In fact, the IMF is more than sufficient to become an international organization that houses the organic system. However, considering that the IMF already has its own decision-making system, it may be difficult to accommodate. In addition, not all IMF member countries will join the UNIM in the early stages.
3. The World Central Bank
The World Central Bank (WCB) is the central bank that issues organic currency and runs the entire system. The WCB is responsible to UNIM. The WCB has representative offices in each member country called the World Central Bank National (WCBN). The WCBN coordinates with the national central banks (NCB) of each country. WCBNs and NCBs around the world run the operation of the organic system in a decentralized manner.