SUPRANATIONAL CURRENCY GES

The idea of a supranational currency GES (Grain Equivalent Standard) based on the weighted average value of the IGC (International Grains Council) grain standard on the world market.

The modern world economy is gripped by a complex of financial and economic turmoil due to the breakdown of the global monetary system, a short list of which boils down to the following acute problems: a) huge government budget deficits exceeding a critical 3% of GDP; b) the total debt in the world is three times higher than global GDP: the public debt of a number of countries, has exceeded their GDP; c) unbridled emission of money supply, which is several times higher than the normal rate of economic growth; d) fictitious capital of astronomical proportions: the volume of derivatives amounts to hundreds of trillions of dollars in the global economy. These are the results of the dominant direction of financial policy in macroeconomics, the essence of which boils down to a massive injection of money into the economy to stimulate economic growth and counteract the crisis phenomena of cyclical development. In practice, this leads to a disconnection of the money supply from the material basis of real assets and a general breakdown of the financial system.

Misunderstanding of the value principles of monetary circulation is the main flaw of modern economic science. Hence the reckless course to "satisfy consumer demand" for money with unrestrained monetary emission and the policy of "quantitative easing – QE", which rapidly increase the money supply in the economy. At the same time, the unbridled increase in the materially unsecured money supply in circulation gave rise to the so-called “financial economy”: the increase in capital not in the sphere of commodity production, but through transactions in stock markets. As a result, the incredible growth of fictitious capital, which depletes the real sector of the economy. This is the result of the financial policy of the modern macroeconomic mainstream. The fundamental reason for its depravity lies in the fact that the monetary system is deprived of a value basis – reliance on the material-cost foundation of the real economy. As a result, world finance found itself in a deep crisis that emerged after the liquidation of the gold-dollar standard of the Bretton Woods system, which manifested itself significantly in 1998. and finally plunged into it in 2008.

Based on the instability of the global financial system, today there is a particularly urgent need for a radical reformation of the global monetary architecture – the creation of a qualitatively new international monetary unit as a reserve and means of payment. This is necessary to curb emission-destructive processes in the economy, stabilize the system of international settlements, normalize the equivalent exchange of goods in trade and overcome the pathological phenomena of the "financial economy". In this regard, we have proposed the idea of reforming the global monetary system on the material-cost basis of the world economy, namely: on the basis of the world-weighted average value of the grain standard IGC (International Grains Council), it is proposed to create a supranational monetary unit GES (Grain Equivalent Standard), as an international means of payment and reserve. The algorithm for the nominal value formation of such a currency is as follows:

1 ton of IGC grain → exchange value of IGC grain (in USD) → monetary unit 1 GES.

The currency formed in this way acquires a value scale of prices, that is, it acquires a nominal-value link to a certain value indicator of a material good taken as a standard, which is IGC grain: 1 GES = value of 1 ton of IGC grain. As a result, the global financial system, based on the material foundations of the real economy, optimizes the money supply in terms of value and acquires a perfect toolkit for calculating the value parameters of material goods created by labor, which guarantees the high-quality performance of financial operations of exchange, payments, accumulation in international economic relations. The advantage of such a currency system is the stability of the monetary unit in terms of its purchasing power in the long run, since the value of the standard IGC grain, on which the GES currency is based, is in line with the long-term trend of the movement in the value of the bulk of commodity products, which is virtually the most important guarantee of the stability of the world financial architecture.

A feature of the GES system, it is worth emphasizing once again, is the presence of a value scale of prices, that is, the binding of a monetary unit to the value of a reference particle of a material good in the form of IGC grain. Accordingly, the price scale of the GES system floats freely in the general flow of the value, synchronously with it. – Guarantee of long-term sustainability of GES currency. This is a significant advantage of the grain currency standard over the gold currency standard, where the price scale was rigidly fixed at $35 per troy ounce (0.88571 g of gold per dollar), regardless of trends in the market value of the gold standard. This doomed the dollar to be isolated from the value fundamentals of the economy. But even if the dollar was tied to the market value of gold (and not to its weight), the gold exchange standard would not stand the test of practice, since gold is unsuitable as a value standard for the reasons specified in the article. As for the modern system of Special Drawing Rights (SDR), the price scale as such does not exist for it at all. The dollar to SDR exchange rate ($1.35 = 1 SDR as of July 2023) says little about the value parameters of comparison of these currencies, since the dollar itself has no price scale since August 15, 1971.

By the way (very important!), if the US dollar is tied to the GES standard, it may well continue to traditionally play the role of a payment and reserve medium in the world economy, moreover, against the background of growing confidence in it. This would only simplify the grain currency system, limiting the GES standard primarily to the function of a measure of value and reducing its role mainly to an exchange rate guide for national currencies.

The practical task of the GES grain standard should be as follows: a) by fixing national currencies on a solid material and value basis, curb the money-issuing bacchanalia in the world economy; b) on the basis of a value-adequate monetary unit, normalize the equivalent exchange of goods in world trade; c) by curbing the self-growth of fictitious capital, ensure the development of the real sector of the economy. In addition, by qualitatively fulfilling its main function as a measure of value, the new monetary system will significantly simplify the calculation of cost parameters, in particular, when carrying out financial transactions exchange, payments, accumulation, making unnecessary the need for such tools for calculating inflationary distortions of value movements as the GDP deflator and the consumer price index (CPI). All this is possible if there is a cost adequacy of the supranational monetary unit.

What is the current state of the global monetary architecture? Stillborn, in fact, the child of the Jamaican conference against the background of the constant decline of the dollar as a reserve and means of payment. The GES currency, in case of adoption of the grain standard, may well take over the role of SDR. Thus, in the case of reforming the world monetary system on the basis of the IMF (the most optimal option), the structure of this institution, its regulatory tools and functions remain unchanged, with one exception – transfer of the world currency unit from the base of floating rates of five currencies to the base of the GES grain standard: transition from SDR to GES. However, their parallel existence is generally acceptable for exchange rate mutual control and comparative analysis of "GES versus SDR" and clarification of the traditional question: who will beat whom? The advantage of GES over SDR lies in only one thing - a strong material base of the GES currency, which SDR lacks.

Finally, what are the geopolitical implications of adopting a supranation-neutral currency? Normalization of equivalent exchange of goods in world trade, establishing fairness in international settlements and payments, stopping the “export” of inflation by excessively issuing dollars outside the United States – all this would quench the passions around the question “who is robbing whom?” and would reduce the degree of hatred towards the United States. Depriving the dollar of the status of a world currency will have some (by the way, not only negative) consequences for the United States, however, the creation of a high-quality currency architecture is in the interests of the entire civilized world, and this is the main thing. At the same time, the introduction of a new monetary system by a coalition of democratic states on a single financial basis should leave authoritarian regimes outside the GES currency zone, thus maximally limiting their access to the international division of labor, foreign investments and loans. This should undermine the financial foundations of modern authoritarianism. In particular, the collapse of the false price of gold as a result of the introduction of a new currency system will significantly hit some autocracies that have recently been feverishly accumulating the gold reserves of their foreign currency reserves. Changing the balance of power in favor of a democratic coalition with its monetary system would also put an end to the price voluntarism of the OPEC. Ultimately, the GES system would contribute to global economic integration, centripetal tendencies of globalization processes, and the formation of a mono-integral world on a democratic basis.

In conclusion, it is worth recalling once again: the main advantage of the GEK grain standard is that the value basis of its currency, based on the material base of the real economy, freely drifts towards reducing the value of the vast majority of goods. This is a guarantee of the stability of the GES monetary unit in terms of purchasing power in the long term, a guarantee of the stability of the supranational monetary system and, accordingly, global finance.

The current world finance crisis prompts the search for a qualitatively new international monetary system that would bring the total money supply into line with the total mass of real assets value in the world, that is, establish global value-monetary parity on the basis of a strong supranational currency as a means of payment and reserve. It is about reformatting the global monetary system on the material and value basis of the real economy by creating a value-adequate international monetary unit. This innovation would rid world finance of the ballast of a materially unsecured money supply, would strike a blow to the fictitious overaccumulation of capital of the “financial economy”, would promote international payments in trade, lending, and investment, which would stimulate the restoration of the producing sector of the real economy.

To implement the global project of a new currency system, it is proposed to create a supranational monetary unit GES (Grain Equivalent Standard) based on the weighted average market value of the International Grain Council (IGC) grain standard according to the algorithm:

1 ton of IGC grain → exchange value of IGC grain (in USD) → monetary unit 1 GES.

The currency formed in this way acquires a value scale of prices, that is, it acquires a nominal-value link to a certain value indicator of a material good taken as a standard, which is IGC grain:

1 GES = weighted average price on the world market for 1 ton of IGC grain.

As a result, the global financial system, based on the material and value foundations of the real economy, optimizes the money supply in terms of value and acquires a perfect toolkit for calculating the value parameters (measures of value) of material goods created by labor, which guarantees the high-quality performance of financial and settlement operations of exchange, payments, accumulation in international economic relations. The advantage of such a currency system is the stability of the monetary unit in terms of its purchasing power in the long run, since the value of the standard IGC grain, on which the GES currency is based, is in line with the long-term trend of the movement in the value of the bulk of commodity products, which is virtually the most important guarantee of the stability of the world financial architecture.

Keywords: world financial architecture; global monetary system; supranational currency GES.