Historically, it has been seen that every time when financial as well as political constancy has allowed the expansion of global trade, the world has witnessed endeavours to launch a common or collective currency that would fulfill the requirements of commerce. In fact, a common or shared financial pattern has generally led to the extension of political power or empire simply because there are plenty of political advantages of establishing a collective currency. For instance, everyone, including the Chinese Empire, the Roman Empire and more recently the British Empire has introduced common currency models in all the areas over which they had their sway. Even if there are financial motives behind introducing a collective currency, history hints that it is politics and not economics that has been mainly responsible in determining the currencies circulating in different regions - both in the past and even in this age.
While the member nations of the European nations have introduced the Euro only in 1999, the first ever endeavour to establish an intercontinental currency for the European region was made way back in 1800s. Looking back, you will find that the German Zollverein was first launched in the year 1834 and subsequently, the German monies were merged into the mark in 1873. The year 1865 witnessed the introduction of the Latin Monetary Union having Italy, France, Switzerland and Belgium as its chartered members and this system continued till 1914. According to the charter, every one of these nations consented to issue coins that would be acceptable as currency by the government offices in the other chartered member nations.
It may be mentioned here that the International Monetary Conference held in 1867 was a result of the comparative attainment of the Latin Monetary Union. The International Monetary Conference made an effort to design and circulate a common pecuniary benchmark for Europe as well as the United States. It minted a single currency that was equivalent to 5 US dollars, 25 French Francs and one British pound, but the plan failed to succeed. In fact, the gold standard may be considered very close to a common international currency in an era when there was no common European government or any global agreement on currency. As per the gold standard, the relative value of the currencies of different nations were determined on the basis of their worth in gold. As a result of the gold standard, to a great extent, it was possible to do away with the rise and fall of the value of one nation's currency vis-à-vis another during the period between 1870s and 1914. However, the World War I broke out in 1914 and the different nations were compelled to shelve the conversion of their respective currencies.
Several endeavours to even out the international financial structure after the end of World War I notwithstanding, none proved to be successful enough. In fact, the dollar standard was introduced by the Bretton Woods as a substitute for the gold standard. According to the dollar standard, the worth of the dollar vis-à-vis once ounce of gold was secured at $35 and the other currencies of the world were determined vis-à-vis their respective value in dollar. Even the exchange rate of the currencies were fixed for a short duration, but were stretchy for the larger period of time. Then again the world had undergone a sea change during the period between 1944 and 1973 and even the Bretton Woods disintegrated. By 1973, fixed currency exchange rates replaced the variable rates.
Actually, in 1988, the Delors report gave a thrust to form a unified financial system in Europe. The Delors report promoted the progression towards a single currency for entire Europe and formed the base of the Maastricht Treaty of 1992. In fact, the Maastricht Treaty also fixed a schedule for the change towards a common currency for the European Union that became a reality on January 1, 1999.
Apart from this move in Europe, several other endeavors were made to establish currency unions or unified currencies after the end of the World War II. Going by history, among all these efforts two moves to set up unified currencies were successful on two instances. In the first instance, a relatively smaller nation harnessed its currency with the currency of another bigger country. And in the second instance, a number of nations relinquished their authority over their respective fiscal policies and empowered an international central bank to determine a common currency or form a currency union. It may be mentioned here that since the end of the World War II, Luxembourg and Belgium were charters of a currency union. Likewise, some African nations, including Swaziland, Namibia and Lesotho had joined their respective currencies with the Rand of the South Africa.
Nevertheless, since the end of the World War II, only two international currency unions have been successful. The currency union formed by the different islands of East Caribbean during the days of the British Caribbean Currency Board in 1950 was a relatively smaller success story. On the other hand, the Communaute Financiere Africaine (CFA) was a bigger success story as far as the establishment of a currency union is concerned. The members of the CFA comprised the erstwhile French colonies that attained independence during the early part of the 1960s. To this day, as many as 14 nations in west and central Africa use the CFA Franc as a shared currency among them.
It may be mentioned that monetary requirement as well as progresses made in the field of technology worldwide have driven several nations that still do not have a common currency towards a shared fiscal pattern. Today, the fact is that the US dollar is acknowledged nearly all over the globe. According to a rough estimate by financial experts, almost 50 per cent of this wonderful currency of the United States and most of its $100 bills are in the possession of people and organizations outside the United States.
Today, the development of technology has brought the currencies of the different nations of the world together in such a manner that is entirely different from the times of the gold standard or that of the Bretton Woods. Although it may appear to be incredible, a whopping amount of 1.5 trillion US dollars are exchanged in the form of currency daily. In other words, approximately an amount of $300 is exchanged for each individual on the earth in one day! Money is such a powerful item that variations in the valuation of currencies may even result in or cause economic recessions as well as change in political leadership. Currency not only affects our routine life, but economics and politics as well. Considering this vital aspect of currency, the enormous savings that could happen owing to the establishment of a common currency for the entire world can easily be envisaged.
Precisely speaking, historically, it has been observed that people around the globe aspire to change the existing monetary system and shift towards a common currency at any time when a transformation like this is practicable both fiscally as well as politically. It is never difficult to find the rationale behind such desires. Simply speaking, the advantages of having a common currency are far more compared to the prices. It is interesting to note that while the political developments have further divided the world in smaller compartments, economics, finances and technology have actually brought the different nations of the globe closer. In other words, these three vital aspects have integrated the nations of the world into a global village. Still, there is hardly any rationale in assuming that fiscal assimilation in the arrangement of a common currency is not possible in a world that is divided politically.