SOLVING THE PROBLEMS

SOrganic Global Currency is created to eliminate the current costs of the tyrannical global monetary system. Organic Global Currency consists of three main principles which are applied to work principles as explained in The Main System.

When applied, all the global monetary costs as explained in the Global Monetary Problems, can be reduced, even omitted.

1. Free Money

The Organic Global Currency (OGC) system is created and used by all members themselves. Therefore OGC is free money. All member countries get free OGC which can be used as an international payments for international transactions among members.

This is the main difference with the current global monetary system. In the current global monetary system all international currencies must be bought with real goods and services. Whereas in the OGC system, each member country gets OGC as much as needed (based on The Globe calculation) FOR FREE.

Seignorage

Seignorage is the advantage of printing or issuing new money. Who took advantage of printing the new money? The advantage of printing local currency is belong to the government of that country. International currencies issued by certain countries like US Dollars and Euro the seignorage is belong to the United States Government and the European Union.

How about Glob? Glob is issued by The Globe. But The Globe is not a commercial body that manages revenue. Therefore, in the OGC system, seignorage from each Glob issuance will be returned to their respective countries. So it is the member country that gets seignorage.

Glob is a zero depreciation. So the Glob seignorage is pure seignorage without inflation costs.

This is the democracy of economy. In an economic democracy an international currency is free money. If a country still buys currencies from other countries in order to make international transactions, it means the country is still in the tyranny.

2. Foreign Exchange Reserves

In Organic Global Currency, as explained in The Main System – Amount, the needs of international currencies for each member country are provided by The Globe, no matter how much they need.

Thus, foreign exchange reserves are no longer needed. All Organic Global Currency member countries do not need to build foreign exchange reserves fortress. Because the needs of international currencies have been provided by The Globe.

In 2018, the total foreign exchange reserves in the world reached 10.5 trillion US Dollars. When foreign exchange reserves are no longer needed, these funds can be used as productive investment funds throughout the world. Fresh investment funds can flow to developing countries. This will make these countries have new energy and grow faster.

As explained in the Global Monetary Problems, the current global monetary system forces all countries in the world to build a very expensive and wasteful foreign exchange reserves as monetary defense. In the OGC system, the fort is no longer needed. Organic Global Currency removes a very expensive tyrannical global monetary costs. OGC removes total loss and inefficiency of foreign exchange reserves.

3. Free of Depreciation

Figure 1, Depreciation of the United States Dollar from 1913. Sources : forextraderdotlive.files.wordpress.com

Since it was first issued in 1913, the US Dollars currency has declined in value of 95% for 100 years (2013). So if we hold 1 US Dollars in 1913, today’s value is only 5 cents (US Dollars 1913), or 4.5 cents in 2018. The same thing is the Euro currency. From the first time it was issued in 1999, for 19 years (2018) the currency of the European region had declined one third. So 1 Euro today is 2/3 Euros in 1999.

In the last 20 years, all of the world’s strong currencies have depreciated (a decrease in value) an average of 2% per year. While the weaker currencies might decline more.

All currencies in the world, both international currencies and local, both strong currencies and weak, consistently depreciate. This depreciation is not caused by something external, but internal.

As explained in The Main System, Glob is a super stable international currency with zero depreciation. The Globe can be the most stable international currency in history. Glob will still has the same value in the next 20 years and even 100 years to come.

Thus, Organic Global Currency can eliminate the costs of the tyrannical global monetary system in the form of international currency depreciation costs of 200 billion US Dollars every year which have been charged to all countries in the world.

4. Trade-War Free

As explained in the Global Monetary Problems – the Trade War, the current international trade is full of pressure, because all countries pursue a surplus. This pressure causes all countries to be trapped in a trade war that is equally detrimental. The trade war has also caused half of the world’s countries trapped in foreign debt that cannot be paid.

Whereas in Organic Global Currency, this condition is completely eliminated. The OGC system provides any international currency needed by all members. That way, all countries will no longer pursue a surplus. Normal balance in international trade in the OGC system is a zero balance (zero surplus / deficit). This is in accordance with the original law or the original nature of the trade, full reciprocity or zero balance (zero deficit / surplus). Then, no trade war is needed.

International trade will be flourish, because all countries can export or import freely as much as possible without worrying deficit or been burdened by must-surplus obligation.

Why is there no trade war in Organic Global Currency? There are two reasons.

First, no matter how many countries need international currencies, The Globe can provide. Thus, countries do not need to pursue surplus.

Second, the state does not need to worry about trading balance and finally account balance, because The Globe has an autobalancing system that will always make the trade balance be balanced in all conditions.

As explained in The Main System – Exchange Rate, The Globe uses The Globe Exchange Rate to benchmark local currency rates. The Globe Exchange Rate System has two autobalancing, namely the automatic balance system of export power and the automatic balance system of trade balances.

This double autobalancing system will make the export and import power of all countries always in the same position. This system also makes the international trade balance always in a balanced position (zero deficit or zero surplus).

Whatever policies made by the state to change the competitiveness of export or import products, will be neutralized by the autobalancing system.

If the country makes export subsidies (dumping) of certain goods for example, The Globe Exchange Rate will consider it as a decrease in production costs and will respond with an increase in the local currency value. As a result, the impact of dumping on export power will be neutralized.

The same thing applies to imports. If the state carries out a policy of import barriers (tariffs), The Globe Exchange Rate will respond by raising the value of the local currency. As a result, the country’s exports will decline as imports too.

In essence, whatever the trade policy made by all member countries, their export and import power are always the same. And the international trade balance will always be close to a neutral position (zero).

Organic Global Currency removes the global monetary costs of tyranny, equally detrimental trade wars.

5. Optimum Efficiency

Ideally international trade can help a country’s economy achieve optimum production and consumption. International trade can increase national products efficiently to the export market and replace inefficient national products with imported products.

But this condition cannot always be achieved because many countries are more concerned with pursuing surpluses and avoiding deficits for monetary security at all.

In Organic Global Currency, where there is no demand for surplus, nor fear of deficits, and well equipped with an autobalancing system, there is no threat of monetary security. All countries can concentrate on pursuing efficiency targets by optimizing international trade.

Figure 2. Shifting efficiency in international trade.

International trade in principle is shifting allocation of less efficient resources to more efficient, or efficiency shifts. The greater international trade is made, the greater the shifting takes place, and the more efficiency they can make.

In the absence of trade balance barriers, all member countries can increase international trade as much as possible to make as much shift in efficiency and resources allocation. Organic Global Currency removes the cost of the global monetary system, i.e. international trade inefficiencies.

6. Removing International Imbalances

With the autobalancing system embedded in exchange rates, Organic Global Currency can eliminate all the trade imbalances on international trade.

Can Organic Global Currency also eliminate international imbalances as a whole? The answer is yes. Organic Global Currency can reduce and ultimately eliminate international imbalances.

With the autobalancing system, imbalances in the international trade between countries can be eliminated. All countries will be put in the same trade position, no matter how efficient the country is, and no matter how inefficient.

In Organic Global Currency, the prices inequality of goods and services is responded to by changes in exchange rates. As the result, the prices of goods and services in the country become the same in the international market. This opens opportunities at a deeper level, i.e. investment.

In lower productivity countries, the exchange rate will drop. As a result, production costs in the country will decline, and investment opportunities will increase. So the imbalance in prices of goods and services will open up opportunities for investment and revive production systems in the country.

If the investment comes, the value added will remain in that country. Organic Global Currency does not open the product market, but opens up the investment market. With the same power of export and import of all countries, investment opportunities are flat and scattered. As a result, international imbalances will be reduced, and can even be erased totally in the long run. Organic Global Currency removes the cost of the global monetary system, i.e. global imbalances.

7. Removing the Middle Income Trap

As explained in the Global Monetary Problems, the dominant cause of the middle income trap is the global monetary system itself. In the current global monetary system, it is not possible for all countries to advance from middle income to high income. Because to succeed into a high income, a country must be able to take advantage of other countries’ markets. Every country takes off, there must be other countries left on the ground to support the taking off country.

With the autobalancing system, Organic Global Currency removes the dominant cause of this income trap. Every country can go through without the need to make another country as a pad.

 Figure 3. The difference market response to the imbalance between the current global monetary system and Organic Global Currency

The main difference between the current global monetary system and Organic Global Currency is that in the current system, market inequality is responded with the flow of foreign products. While in the Organic Global Currency system it is responded with foreign investment. If the imported goods penetrate the market, then the economic value added will flow to the country producing the goods. If the foreign investment penetrate, the economic value added will still remain in that country. So in the Organic Global Currency, economic value added of every markets cannot be snatched away by other countries. Every country can utilize their domestic market to sustain its own growth energy.

The market is a growth potential. In the Organic Global Currency system, this market potential is always in domestic control. With this system, even underdeveloped countries have the same opportunity to become a prosperous country without worrying about the energy of their markets being snatched away by others.

The Organic Global Currency System removes the current cost of the global monetary system, i.e. middle income trap.

8. Removing the Monetary Crisis.

As explained in the Global Monetary Problems, the monetary crisis is the accumulation of all imbalances caused by the tyrannical global monetary system, which at a certain time the local monetary security system is unable to hold it back. The monetary defense system is broken and finally forms a new balance. The monetary crisis occurs from mild to severe levels.

Is Organic Global Currency able to eliminate this monetary crisis? The answer is yes.

There are three factors that make Organic Global Currency eliminate the monetary crisis.

First, eliminating the imbalance factor

The Organic Global Currency system is able to eliminate imbalances. The seven points above explain how Organic Global Currency removes imbalance factors.

The autobalancing system as explained in The Main System is an active system can eliminate all imbalances and their potentials. By removing imbalances, Organic Global Currency eliminates the factors causing the monetary crisis.

Second, Eliminating Fluctuations

The Globe Exchange Rate represents the real value of the local economy and adjusts it to local monetary. The monetary gap with the real economy disappear. Thus, exchange rate fluctuations also disappear.

By removing fluctuations, the trigger factors for the monetary crisis are removed too.

Third, Back Up 100%

The biggest threat from the monetary crisis is FOMO and FUD. There is no country 100% immune to the impact of the monetary crisis in the full scale FOMO and FUD. Because there is no country has a ratio of foreign reserves 100% of the amount of M2 (circulating money, public savings, and deposits).

Is the Organic Global Currency able to withstand FOMO and FUD in a full scale? The answer is yes.

As explained in The Main System – Conversion and backup system, Organic Global Currency provides conversion services and backup 100% of the local currency system. If market sentiment is too strong and Glob allocation is not enough to stem the sentiment, The Globe will open a local currency conversion system to the OGC system up to 100%.

By this way, the biggest wave of monetary crises, namely FOMO and FUD in full scale, can be overcome. Organic Global Currency can completely erase the monetary crisis.

9. Stay Flexible

The toughest challenge in currency integration is flexibility. When a currency is combined, the flexibility of each country’s monetary and fiscal system will be reduced or even lost.

In Organic Global Currency, each country still uses its own local currency system. So each country still has control of their respective monetary policies. Developing countries that still need expansionary policies are possible to make progressive policies. While countries that are overheating can make strict policies to ease economic temperatures. Developed countries that are more concerned with monetary stability can make policies that emphasize credibility and stability. Every country can make its own monetary policy in accordance with their conditions.

The economic cycle of countries in the world is not uniform. When one region is in an expansion cycle, the other region may be in a cycle of contraction. If they use the same policies, the effect of the policy will not be effective. Different cycles require different policies. With this flexible system, all member countries in the OGC system can make monetary policies that are in line with their economic cycle.

In Organic Global Currency, each country has the same and real ownership of the common global currency. On the other hand, they still have the freedom to regulate their monetary and fiscal systems. Organic Global Currency is a joint global (democratic) monetary system that maintains the freedom of each monetary policy.

10. Other Benefits

Free Interest Rate

Organic Global Currency is a free money and free interest rate

In the central bank level, under normal monetary conditions, the central bank’s interest rate is zero percent (zero interest rate).

How can Organic Global Currency be a free interest rate?

1. Organic Global Currency does not experience depreciation (zero depreciation) both short and long term, so interest rates are not needed.

2. The money control system in Organic Global Currency is a direct control system, as explained in The Main System – Control System. Thus, central bank interest rates are not needed.

3. The Global Bank (the central bank that runs Organic Global Currency) is not related to any state budget. The Globe does not need public debt to increase the budget. Thus, interest rates are not needed.

With 3 conditions above, the Glob interest rate at the Globe level is 0 percent or no interest. Organic Global Currency is a free money and free interest rate.

Reducing exchange rate and fluctuations

Although it cannot eliminate fluctuations in exchange rates perfectly as a single currency, the Organic Global Currency can reduce fluctuations significantly. This is caused by the use of a price index as a benchmark of the exchange rate.

The price index is the weighted average price of all goods and services in a country. In the price index, all goods and services are included and calculated proportionally or weighted average. In statistical law, the larger the population, the more stable it will be. The overall price of food, for example, is always more stable than the price of each type of food. Because of the fluctuations in each price of food can be neutralized by fluctuations in other types of food. The more types of food we calculate, the more neutralize each other. So if we include all types of food, drinks, equipment, and all types of goods and services, the price will achieve maximum stability. The price index is a combination of all prices of goods and services with a weighted average so that the fluctuations become a minimum.

When compared with currency fluctuations, price indices are far more stable in all countries. Here are some comparisons between local currency fluctuations against the US Dollars currency compared to local price index fluctuations.

The following is an example of a comparison chart between the Australian Dollar (AUD) / USD exchange rate and the commodity price index in Australia.

Figure 4. Comparison of the volatility of the Australian Dollar (AUD) / USD exchange rate with the commodity price index in Australia. Image source eqfinancial.com.au

Below is a comparison between price index fluctuations in South Africa with the fluctuations of the Rand currency against US Dollars.

Figure 5. Comparison between price index fluctuations in South Africa with Rand fluctuations against US Dollars. Image source: financial-spread-betting.com

The price index is always more stable than the exchange rate of the country because the volume and size of the commodity market is far greater than the money market. In statistical law, the bigger the size, the more stable.

Organic Global Currency uses a price index as a benchmark for currency values. Glob uses a global price index. While the exchange rate uses a local price index. Thus, the fluctuations in the exchange rate between the local currency and Glob will approach the fluctuation of the local price index. Exchange rate fluctuations in the OGC system are far more stable than the current exchange rate system.

Organic Global Currency significantly reduces exchange rate fluctuations from the current global monetary system.