In dealing with this subject we are going to "climb to the highest diving board and go in at the deep end." Due to GLOBALIZATION and the concept of OPEN MARKETS and "FREE TRADE AGREEMENTS," it has now become imperative that all countries get together to create a NEW CURRENCY which shall operate SOLELY as an INTERNATIONAL CURRENCY for the settlement of international trade debt. To this currency all domestic currencies shall determine their worth to this currency--INCLUDING THE U.S. DOLLAR. One would question the necessity for a new and separate international currency to settle trade debts. There are a number of reasons which we will give in order to bolster this statement. While we may confine ourselves to maybe only a few, we feel that there are many others which will apply as well that other folk who think likewise could find equally valid.

The basics of international trade is identical to any debt incurred between two parties; be they individuals, businesses or countries. A debt incurred by way of a loan, the provision of a service or the sale of goods requires that these be repaid in some manner. A barter arrangement still requires the value of each commodity to be evaluated--in themselves as well as to each other. Primary to any and all transactions is that of determining whether either party has the capability or worth to make the payment The determination to make the payment, is what concerns us most. When someone applies for credit or a loan from a financial institution, their credit-worthiness and/or ability to repay is brought into question. A banker may require "cover" of twice or 2.5 times the value of the facility requested in order to assure himself that the assets are there to cover the loan. For a mortgage or a "bond" as it is called in Europe to be advanced on a property, the cover required is the value of the property, less 10% of it's value to be at risk by the borrower. In other words the mortgage will be 90% of it's assessed value--and the borrower is at risk for the balance. Not only at risk, but the 10% must be paid in as cash. So here we have two factors at play. One is the "credit-worthiness" and the other is the "ability" to pay. If you have NO income ( A job ), you have no credibility. One has to have "cash flow", (an income) in order to gain credibility. And so it also is with countries.

So here we come to the crucial point How does one assess the credibility or credit-worthiness of a country?

Two factors now come into play. One is the value of a country's currency, and the other is it's RESERVES OF TANGIBLE ASSETS, be they "hard assets" such as gold, diamonds or platinum etc., or a currency BACKED BY HARD ASSETS. However there is one other crucial factor which comes into play--and that is CREDIBLE RESERVES OF CREDIBLE FOREIGN CURRENCIES. Basically any goods sold domestically would be paid for in a country's domestic currency. By the same token the exporter requires to be re-reimbursed at the same value, be the goods offered at it's domestic currency value or it's equivalent value of any other currency of choice of the exporter. Subsequent to a sale having been made, payment can be made in a number of ways. The buyer can purchase the desired currency and remit this, or send their currency which the seller can convert to the one of his choice--be it his own domestic currency or any other. However when an international sale takes place a very important factor is brought into play which does not take place with domestic sales. THE COUNTRY--(OR IT'S GOVT.) in which the importer or purchaser of the goods resides has to have the foreign funds or has to purchase these funds in order that the purchase price be paid.

Getting down to specifics, let us examine some factors involved. A country that exports (using U.S. dollar terms) say $50 Billion worth of goods and services will have earned that value in foreign currency. Thus in turn when payment has to be made for foreign purchases, they have available $50 Billion in foreign currency in which to make payment. Basically speaking, this then is the NET WORTH or credibility of a country's ability to settle it's foreign liabilities; including of course any debt incurred by way of loans or bonds which requires the repayment of capital and interest. There are of course alternatives. Should gold form a part of a country's Reserve Assets, a part of this can be sold or offered as payment for debt. However in this case the so-called domestic value of the currency is diminished. What one would like to see is a complete split between Reserve Factors which may be quantified to back the domestic currency, and earnings derived from exports which be applied to payment of foreign debt. Before one can proceed with this line of thought, it would have to be determined whether gold or any other hard asset shall remain to back the values of world currencies. If they are to remain, then we have to re-define as to what extent this shall apply. Either one goes back to being "on the gold standard" and decides to what extent each and every currency shall be so backed, by one or more hard assets--or one dispenses with this concept altogether. In which case new definitions should apply equally to all currencies so as to determine equal value to a currency in order to evaluate their difference in value. In either case hard and fast rules should apply, equal to all currencies.

At this stage we would like to offer the following scenario. It possibly could apply equally as well to either dispensing with reserves to back currencies; as to having a universally recognized system put into place which has defined equal percentages of reserves to back currencies. In either case a new international currency should be created to which all currencies shall be equally evaluated in order to determine their true worth to that currency--and thereby to each other. For want of a name and for the sake of convenience let us call this currency a "UNIDOL", short for UNIVERSAL DOLLAR. Every currency should be evaluated to this, using the same criteria. In order for this to work successfully, there are a large number of changes that have to be made; possibly totally as elaborated here, or partially as agreed upon by all parties. First of all one should elaborate as to how this should function. We put forward the following. The new currency should be controlled by THE BANK FOR INTERNATIONAL SETTLEMENTS. The committee to control this should consist of the Chairmen or Presidents of the Reserve Banks of possibly the 12 to15 most economically powerful nations. Having established the values of all currencies to the Unidol, the committee should meet every two years to revue whether there should be any changes made to the value of any currency to the Unidol. Where a crisis may occur within this period--a special meeting could be held. However having said that, all values to the Unidol are fixed in relation to that time frame. Furthermore, and this is of the UTMOST IMPORTANCE, all domestic currencies shall be just that--and only convertible into another currency via the Unidol; and at that for only very limited reasons. In other words there will have been established some form of currency control.

This is necessary for a number of reasons. Let us examine a few of these. First of all so-called "Market Forces" are eliminated. There can be no "run" on a country's currency. No single or simple factor outside of the control of the committee can alter the value of a currency. Another point: there is no necessity to purchase "forward cover" on a currency, and stemming from this there would be no reason what-so-ever to "trade in currencies." At the same time rigid criteria should apply as to who and how currency changes shall be regulated. For one thing--it would be well-nigh impossible to commit currency fraud internationally. As a domestic currency will be just that--it would be impossible to shift a domestic currency elsewhere. Drug money could not be converted into another currency. Nor would it be possible to invest these funds overseas without going through the Unidol--and this aspect will be rigidly controlled to the extent that payments and the movement of currencies would be limited to the certified payment of an international obligation or primarily to purchase Unidols for eventual conversion into another currency for purely tourist costs or expenditures. Finally those country's whose currencies have been disappearing into "cyberspace" and eventually having to be repurchased with hard-earned foreign currency will have been obviated.

Were this all to be desirable, then a lot of changes have to be made. The crux of the matter is how to accurately determine the worth of a currency. As the American dollar is perceived to be the strongest currency, let us examine their dollar. First the statement of fact. The statement on their "bills" perhaps states it well. Quote: "This note is legal tender for all debts, public or private." That's it. No statement of worth. The same statement appears on the one dollar bill as on the one hundred dollar bill. And if there were to be $500 and $1000 bills--one would presume the same wording. This is no easy or simple matter. Surely a currency must be backed by something tangible. If not hard assets--then what? The growth of a domestic currency would normally keep pace with the growth of the economy. If the growth is say 3% and inflation 2%, then one expects the money supply to grow by 5% to keep pace with it. For every job created there has to be money available to pay that wage. And when prices or wages rise there has to be currency to pay for this. However when jobs are lost or prices fall, the money more often than not remains in circulation. Now we come to an anomaly. Consumerism--which is the purchase of goods or services; especially be they imported. On average the balance of trade deficit of the UNITED STATES over the past 15yrs. has been in the region of $125 Billion per year (possibly more). Thus $1.875 Trillion had to be printed to pay for these imports which were in excess in value of goods and services over export values. The money has to come from somewhere. We know it is "printed bills" which is stated not to be backed by a tangible worth! Companies who are importing are not those who are the exporters generally speaking. Yet the Government is forced to purchase the foreign currency by using its own currency to do so. Generally speaking money supply growth is created by debt. In the United States short term and long term Govt. bonds and the weekly sale of 60day and 90day and 120 day treasury bonds creates the money required to set off payments. However the stage is reached where the short term debt bonds created are usually used to pay for or "roll over" as it were old debt. In other words, what comes in on Friday--is used for what has to be paid for on that day. To all this we must add annual BUDGET DEFICITS over the past 25yrs. of on average of say $100 Billion per year to total over $2.5 Trillion. So these two factors alone total over $4.375 Trillion.

The last available figure we had stated gold reserves to be 263 million ounces held at the U.S. Treasury. Thus at say $290 per ounce this totals to $76 Billion to cover total estimated debt in excess of $8.75 TRILLION! Unless our arithmetic is wrong, this equates to a hard asset reserve of less than 1% to cover the debt. Of the debt figure , approx. $5.16 Trillion is domestic debt. As far as one can ascertain, the monetary base created by the Federal Reserve Bank is about $550 Billion in notes and coin. Thus gold to this figure is 13.8% cover. However this is not the full picture by any means. It has been said that the Fed. estimates that $480 Billion is held by the public in notes and coin and $70 Billion used as banking reserves. How much money is out there? Let us quote a few figures:

Currency in circulation                                               $484 Billion

Non Bank Travelers checks                                          $ 8 Billion

Demand Deposits                                                      $361 Billion

Checkable Deposits at banks                                    $ 136 Billion

At Thrifts                                                                  $105 Billion

                                                    Total M1             $1094 Billion

Savings at Banks and Thrifts                                     $1694 Billion

Short term small deposits                                          $ 927 Billion

Money Market Funds                                                $ 802 Billion

                                                    Total M2             $3423 Billion

                           Total M1 + M2 =  $1094+ $3423 = $4517 Billion

Large Time Deposits at Banks and Thrifts                   $618 Billion

Institutional Funds and Agreements                           $ 852 Billion

Euro Dollar deposits held                                           $160 Billion

                                                     Total M3            $1630 Billion

      Total M1 + M2 + M3 = $1094 + $3423 + $1630 = $6147 Billion

Now equate ALL THESE VALUES OF CURRENCY to the $76 Billion of gold reserves !

If we have this situation with the perceived STRONGEST CURRENCY in the world --then it is high time we called another Bretton Woods Conference to discuss currencies and values " before it all hit's the fan." If we are to attempt to evaluate one currency against another, we may have to split domestic currencies with-or-without it's reserves as against what a country has available to settle INTERNATIONAL TRADE DEBT. A private individual's credibility to repay debt is the total cash income, less deductions--i.e. disposable income. Should this not be enough for repayment, then creditors would look to NET ASSETS for settlement. A similar factor occurs with businesses and companies. And so it should be with countries. With Great Britain presently selling off a fairly large portion of it's gold reserves and others stating to follow suit, one would think that there should be some urgency in discussing alternatives. To re-state what was said before; one's value of exports is in reality all that is available to pay for imports. Or so it should be. After all--that is the total of one's income--or are all countries living beyond their means?

If one is to use a "Unidol" as the International Currency, then it's function could possibly relate to the hub and spokes of a wheel. The hub would be The Bank For International Settlements; holding all the Unidol currency. The spokes would represent all the world's Reserve banks, from which and to which all currencies would flow. And at the rim all the domestic banks of the world would be located. One purchases Unidols and sends it to the hub for payment of international debt. This is converted into whatever domestic currency is required to payout the debt. In actual fact the hub could merely act as a "clearing house" and take in--and return each country's domestic currency. All uncleared or un-used currencies would either earn a token interest or be charged a token interest. Finally, fixed RATES OF EXCHANGE are paramount. There should be no possibility of any unilateral devaluation of a currency. This should apply equally to the I.M.F. who whenever they advance a country a loan; there is the demand to de-value their currency or to allow market forces to accomplish this.

Before we bring this aspect of International Trade to a close, there is perhaps another point that one should comment on. The figures that countries use to state "balance-of-payment" differences between each other, is at times perhaps misleading. For instance, a wholly owned company or a subsidiary of an American company situated in England and exporting it's products to Europe would have those stated by England as being THEIR exports. However the head office in the U.S.A. would probably reflect sales and profits as being part of their earnings. Were these products to be sent "home" to the U.S.A. to be sold on the domestic market, they would be classified as IMPORTS. Thus American owned off-shore Copper mines Sugar, Bananas, Oil Rigs and what-have-you are stated by other countries as THEIR exports and as Imports into the United States. AS an example Automobile plants, American owned in Canada are stated as the largest CANADIAN export to the U.S.A. The same applies to lumber ( timber) products--perhaps 80% American owned coming out of Canada into the U.S.A. On the southern border with Mexico this is even more so. In which case--when the U.S. Govt. states a "balance-of-payments" difference between it and another country--it isn't shall we say QUITE LIKE THAT!