Dollar Demise: Is One World Currency Ahead?

By Wilfred Hahn On August 7, 2009 the International Monetary Fund (IMF) votes to increase the supply of SDRs by $250 billion, the first expansion since 1981. It is a proposal that is sure to pass. But, what are SDRs? It is an accounting unit for the reserves of the IMF and stands for Special Drawing Right. Technically it is not a real currency as it cannot be spent in the marketplace. All the same, as this accounting unit is defined as a basket of underlying securities (the US dollar makes up about 44% of its value) functionally, it has already served as a global monetary unit since its inception in 1969. The new increase of SDRs, to be implemented on August 28th, will augment the allocation of SDRs by 7.5 times.

Interestingly, the IMF’s new SDR issue has not caught the full attention of those who believe the world will soon have a one-world currency. That may be due to the fact that the total value of SDRs still only represents a fraction of total world currency reserves (less than 1%) or is not all that visible nor understood.

It certainly is true that the US dollar is suffering an “image” problem. After about six decades as the world’s main reserve currency, many key nations have been intensifying their complaints that the US dollar is no longer suitable. The BRIC countries (Brazil, Russia, India and China) have most brazenly been calling for a new global reserve currency. China would dearly like its currency (the yuan) to play a role as a reserve currency. It is the country that stands to lose the most should the US dollar falter, since it has accumulated large official holdings of USD-denominated assets.

Recently, the Economist magazine presented a picture of the dollar symbol morphing into a dragon. The implication was that the world would be moving to a yuan standard. Could this happen?

It must certainly be recognized that at this stage of world history, any major and sudden development is likely to be prophetically significant … especially so were it to also impinge upon Israel in some way or lead to a new centralized global power structure centered around 10 countries. One of the most important markers of the end times has already been triggered — Israel has been reborn. If the US dollar were to topple suddenly, it most assuredly would be a development that hastens the arrival of end time prophetic conditions.

But would that mean that a one world currency is in the offing? It is possible … but not certain. Many bible prophecy scholars treat the one-world currency notion as if it were specific literal prophecy. It is not. Rather, it is a deduction … and not necessarily an unreasonable one at that. However, if we stick to what the Bible actually says, the correct and supportable response must be that a one-world currency cannot be either proven or disproved. Scripture is silent on this specific idea.

What is clearly prophesied in Scripture are the conditions of global convergence of commerce, politics and beliefs (i.e. religion). That said, it still does not prove that there will be a single, fungible world currency. We recognize that while ecumenicism may ultimately achieve a one-world religious convergence, that this would not require that individual religions will lose their independent identities. Likewise in the financial world. You can have a one-world financial system that reflects similar protocols and conventions, but still many individual currencies.

With respect to the outlook for the US dollar that is cherished by so many, here is a fact that you may not have known: It was recognized long, long ago — in fact, right at the inception of the world’s current monetary regime — that the US dollar was fated to lose its central reserve role. (An important paper written by Robert Triffin in 1960 clearly underlined this conclusion.) In order to provide the currency backbone to the world, the U.S. needed to run deficits (supplying US dollars to the rest of the world.) But this can be done only so long before mounting international debts would overwhelm the U.S., indeed, in part, this is what has happened.

The bottom line? After 60 years of serving as the world’s reserve currency, the globe is swamped with US dollars. (Consider that some 70 percent of dollars in circulation are held outside the U.S.!) Even should a major currency crisis be avoided, it only stands to reason that the US dollar will continue to decline in influence. That could take a long time; or it may not.

Keep your eye on a developing (soon 10-king) multi-polar world and the facilitating role of the SDR.