January 29, 2019

Western Reserve Currencies and the Quest for Dominance
Historically, shifts in reserve currencies have brought pivotal changes in the global balance of power. Beginning with the 15th Century, which marked Western Europe’s global ascendancy, the currencies of the empires of Portugal (1450-1530), Spain (1530-1640), the Netherlands (1640-1720), France (1720-1815), Britain (1815-1920), the USA (1920-) and China, still in gestation, have served as primary media of exchange in global trade.

Every shift was preceded by devastating wars and economic cataclysms -even famine. As it pertains to the U.S., whose saga continues to affect and afflict virtually everyone on the planet one way or another, its transformation from the world’s preeminent surplus and creditor country at the end of World War II into the largest debtor in history and its dangerous non-ideological rivalries with Russia and China in the age of proliferation of nuclear weapons does not bode well for humanity. And yes, proliferation is exactly right. Since 1945, when these nightmarish weapons were first used, India, Israel, North Korea and Pakistan, which at the time weren’t even independent nations, have all acquired them. If history is a precursor of things to come, two things can be inferred. The first is that although a modern war between major powers has not yet exploded there’s no guarantee it won’t. The other is that, with little or no warning, non-state extremists may acquire and use miniaturized nuclear weapons.

Hydrogen as the basis for Special Drawing Rights (SDRs)
The value of the IMF’s (International Monetary Fund) SDR basket is based on fiat currencies of former imperial powers: the euro (mainly Germany, France, Portugal, Spain, the Netherlands and Italy), Great Britain’s pound sterling, the United States dollar, Japan’s yen, and China’s renminbi, the newcomer. The IMF’s formula for determining currency weights in the basket assigns equal shares to the currency issuer’s exports and a composite financial indicator. The latter comprises, in equal shares, official reserves denominated in the member’s (or monetary union’s) currency that are held by other monetary authorities that are not issuers of the relevant currency, foreign exchange turnover in the currency, and the sum of outstanding international bank liabilities and international debt securities denominated in the currency. However, but for a few exceptions, notably heavily subsidized Israel, these criteria are also heavily stacked against ordinary people in Africa, Latin America, the Middle East and central and southern Asia. They presently lack the means to earn enough SDRs to lift themselves out of poverty and compete on equal terms with their former colonial masters.

Aside from scandalous moral and social issues stemming from the abysmal (and growing) inequality of wealth, extreme poverty, and high morbidity and mortality rates, practically all governments and mainstream media worldwide have chosen to exclude from discourse the obvious drawbacks and dangers these issues pose to everyone, including the elites. One such drawback is that the poor simply do not have enough buying power to contribute to the global economy to help prevent (or at the very least mitigate) recessions or depressions; another is that absolute despair and hopelessness breed hate and extremism, and it has a way of manifesting itself in lethal unexpected ways.

A Crucial Omission and its Solution
The IMF’s current SDR formula has two fatal flaws. Firstly, it does not price the system’s impact on the environment. Secondly, it does not contritely admit that this omission is the turbine propelling anthropomorphic climate change –which is killing the planet. Accordingly, the obvious way to make amends is to gradually, resolutely and swiftly replace the SDR basket of privileged currencies –all of them- with a formula (whose specific details would be negotiated) based on (a) the total production of hydrogen by electrolysis of sea water (or, in the case of landlocked nations other forms of green energy), (b) the ratio of green energy produced to their population, and (c) their gross national product.

This shift would:
• Create an economic incentive to produce and use hydrogen to replace fossil fuels to generate electricity and move vehicles.
• Stop the runaway production of carbon monoxide.
• Stop the mad competition to achieve and perpetuate a nation’s currency as reserve currency of the world, a path more likely than not to eventually escalate into a terminal thermonuclear war.
• Introduce the possibility to actually manufacture, collect and distribute pure water anywhere (simply by burning the hydrogen in power plants) to fight growing water shortages, drought, rapidly depleting aquifers, and desertification around the world.
• Create a non-fiat, common currency with a fixed, non-depreciable value based on the above mentioned formula to introduce egalitarian buying power for all nations, and stop current and future asset inflation (particularly real estate) that continually and relentlessly cannibalizes our own progeny.