A Paradigm Shift in Monetary Systems: A Supranational “World Currency”

Abstract

The international monetary system remains heavily dependent on the United States dollar, which functions simultaneously as a reserve asset, a unit of account, a medium of international settlement, and a major store of value. Although dollar centrality has supported global trade and financial integration, it has also generated structural vulnerabilities, including reserve concentration, persistent global payment imbalances, exposure to United States monetary and fiscal policies, and recurrent instability in cross-border capital flows. This paper examines the theoretical and institutional foundations of a possible transition toward a supranational world currency. It reviews selected monetary theories, including Gresham’s law, the quantity theory of money, purchasing power parity, the Marshall–Lerner condition, and the Mundell–Fleming model, and evaluates their relevance to the design of an integrated monetary framework. The paper further develops a contractual interpretation of money, arguing that money functions not only as a medium of exchange but also as a socially recognized claim on future goods, services, and labor time. On this basis, the paper proposes a gradual, institutionally governed transition from competing currency blocs toward a global currency administered by an independent supranational monetary authority. The proposal is intended to reduce exchange-rate risk and transaction costs while addressing, rather than merely relocating, the governance problems associated with monetary power. The paper concludes that global monetary integration may offer important efficiency gains, but its feasibility depends on credible governance, democratic accountability, fiscal coordination, financial regulation, and mechanisms for accommodating regional economic differences.