It is important to note that if the establishment of a common or shared currency for the United States and Europe only involved economic or fiscal issues, in all probability, the introduction of a Eurodollar as well as the setting up of an international Reserve Bank would have been done long back. This is primarily owing to the fact that the fiscal advantages attained from the introduction of a single currency actually surpass the expenses on numerous aspects.
Nevertheless, despite history and economics favouring the launch of a common or shared currency for Europe and the United States, or for that matter the remaining regions of the globe, political issues have always and will carry on being the basic obstacles in the way of establishing a single currency for these regions. As a result, this part of the write-up will highlight the political barriers in introducing a common currency or a currency union for Europe and the United States as well as the setting up of an international reserve bank to administer the fiscal organization. Several people are of the view that the central banks of the different countries are usually self-governing and only answerable to their respective government and already wield too much authority, will become further more powerful when their government relinquishes their authority to control the economic policies in their respective countries. To convince the governments to join a currency union and introduce a single currency, it is essential to make them accept as true that the advantages of having a common or shared surpasses the expenses by far.
It needs to be acknowledged that despite accomplishing transnational collaboration for long, it has been quite thorny for the nations of the European Union to establish a single currency. Thus, it is very natural that making it feasible for Europe and the United States to give their consent to a shared or common currency would be more problematic. Precisely speaking, among all the developed nations, the United States was perhaps the last to set up a central bank for the union, while this was a presumed issue in most of the nations of the world since the middle of the 20th century. In fact, the United States has only recently permitted a nationwide banking system. The United States' membership in the International Monetary Fund (IMF), the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA) and the World Bank is ample testimony of the country's eagerness to take part in global financial bodies.
The political opposition to establishing a currency union is not difficult to understand. As the currency union will be administered by an international Central Bank and not the central banks of the countries that are members of the union, politicians fear that their nation's central bank would lose independence which, in turn, would affect their privilege to manoeuvre the fiscal policies in their respective countries. Nevertheless, it is imperative to distinguish between the terms sovereignty, responsibility and political dominance. It may be mentioned here that while the international body or the Global Reserve Bank will never enjoy complete freedom from the domestic political dominance. In fact, the Global Reserve Bank will actually be answerable to the nations that would be entrusting it with the powers to run the currency union. For instance, in case the international central bank failed to look after the interests of the United States, as a natural process, the United States will pull out of the currency union. There have been such instances in the past when a number of French African nations quit the CFA Franc currency union when it failed to fulfill their requirements. As a result, the fear of exit by any member of the currency union will always goad the Global Reserve Bank to remain accountable to all the member nations of the union.
Here may be mentioned that the foundation of any democratic system lies in the checks and balances that restrict the control or influence of every division of a government. For instance, while the Federal Reserve members in the United States enjoy a great extent of freedom as of the political control, it is the Congress that endorses the appointees of the Federal Bank and these appointees may also be impeached. In case of establishing a currency union involving the United States, it would be necessary to impose comparable controls on the appointees of the Global Reserve Bank and the US Congress will need to endorse the membership of the country in the currency union. Thus, it is evident that the proposed Global Reserve Bank set up to administer the fiscal policies of a currency union will be both sovereign as well as answerable. These two attributes will not be equally restricted.
In a number of manners, compared to setting up of any international agency, establishment of an international Central Bank or Global Reserve Bank would be much simple. Foremost, going by definition, the Federal Reserve is expected to be free from any type of political control in carrying out its routine businesses. In addition, the Federal Reserve will not require any funding from the government, as it will earn profits from the funds or financial resources that the banks will deposit with it. Thirdly, in the past, the Federal Reserve has time and again harmonized its activities with more central banks and when the Global Reserve Bank is set up it will further establish this collaboration. Finally, the basic characters of the fiscal markets are global and even the US dollar is an international money as approximately 50 per cent of the US currency is presently held by individuals and institutions outside the country. Hence, there is little doubt that the proposed Global Reserve Bank will only help in enhancing the cooperation among the different central banks of the world and make it more efficient than what is now.
However, the ultimate fiscal cost of having a currency union would mean that the United States will no longer enjoy the privilege of issuing bonds in it own money - the US dollar. Taking the credit history of the United States in consideration, it may be assumed that introducing a currency union would lead to lesser apprehensions regarding defaulting owing to non-payment. At the same time, the launch of a Eurodollar would also help to lessen the hazards of the bond holders as the government would no more be able to default citing inflationary conditions or price rises.
In order to have some understanding of the debate that may rage over the introduction of a Eurodollar one should identify the interest groups that will endorse the move for a single money for Europe and the United States as well as those who will be opposing any initiative to launch a common currency for these regions. Actually, there would be very few people or institutions that would be negatively and directly affected owing to the introduction of a Eurodollar. While conceptual differences or resistance to the introduction of a Eurodollar is very likely, the economic resistance would arise basically from the companies that would apprehend that the formation of a currency union was likely to promote major international firms at their cost.
In addition to ideological and economic oppositions, the launch of a Eurodollar is also likely to have a political impact or effect outside the United States. In fact, it was seen that before the introduction of the Euro, several European nations experienced problems in encouraging their respective citizens to relinquish their national currency in favour of a common currency regulated by the European Central Bank. Now, it would be even more problematic to encourage or persuade the Americans and the Europeans to relinquish their respective monies in favour of a single currency that would be controlled by a Global Reserve Bank. On the other hand, outside Europe, the introduction of a single currency for the United States and Europe would give rise to a faction of insiders who had been a partaken in the leading currency of the world as well as a group of outsiders who were not a part of this currency. In fact, in such a situation, the globe is likely to be split into two groups - the countries circulating the Eurodollar and the remaining nations. In order to avoid such a situation, it would be necessary to make preparations to convince the countries outside the United States and Europe to join the currency union of the Eurodollar.
It may be assumed that when it is possible to shift from the present multiple currency system to a common currency for the United States and Europe, changing into a system wherein all the nations of the world would have a single currency would be faster as well as comparatively easier. The pace at which this change may take place would astonish many, who are now sceptical of such an occurrence. In fact, it is possible that the world that has a multiple currency system, comprising as many as 200 different monies, today, may change into a single currency system just in another decade's time. And a quarter of a century later, when historians would go through the progression of a single currency system, many of them would wonder as to what made people to do away with the Babel of monies that prevailed during the 20th century and the early part of the 21st century.
Many people may be apprehensive that a fiscal amalgamation may eventually result in the political assimilation of nations. However, it needs to be underlined that any such fear is baseless. Precisely speaking, just the opposite of such a condition holds true. In fact, fiscal unison can not only be present with political assortment, but also support it. For instance, the European nations that have members of the Deutsche Mark bloc comprising the Netherlands, France, Denmark, Switzerland, Austria, Belgium and Luxembourg, did not witness any decrease in their political sovereignty by associating their national currencies with the Mark. In a number of manners, when you have a currency union, it actually promotes political independence simply because it lessens the function of fiscal policies in politics.
The European Union will gain significantly from the establishment of a currency union comprising the United States and Europe as it would make the Euro stronger. There are several Europeans who apprehend that the Euro would not succeed following the introduction of a currency union comprising the United States and Europe. On the contrary, their apprehensions will evaporate if the Euro is considered to be a transitional move on the way to a currency union between Europe and the United States.
As mentioned, introduction of a single currency or establishment of a currency union for the entire world will help to bring the nations closer to each other. And this may actually also lessen the chances of disagreements or clashes between nations. It is believed that when a common currency would be used all over the globe and multinational companies would be functioning in hundreds of countries; the possibilities of warfare owing to financial reasons would be decreased considerably. In fact, this idea has been the motivating force for the amalgamation of the currencies in Europe since the end of the World War II.