A global currency, also referred to as a world currency, is one that is commonly used in international transactions. This term can thus be used to refer to the prevalence of an existing currency, or to a hypothetical future currency. Today, it is frequently applied to the U.S. Dollar, and to a somewhat lesser extent, the Euro and Japanese Yen. It is also the expression used to describe a non-existent supranational currency that can be used in international business without being especially linked to the economy of any one particular nation.
Since the 1940s, the U.S. Dollar has been the standard by which other currencies are commonly measured. This does not mean that it has always been, or is, the strongest currency. The widespread use of the U.S. Dollar originated while the gold standard was still in place. At that time, each dollar could be traded for a certain amount of gold. At the start of the 1970s, the gold standard was abandoned but, mainly due to the prevalence of the U.S. Dollar in international business, it has remained the most common world currency.
Before U.S. currency took on a global role, the Spanish dollar had dominated international transactions in the 17th and 18th centuries in a similar way. Again, this was largely due to Spain's far-reaching economic interests and involvement. The more a country is involved in international business, the greater a role its currency is also likely to play.
There is a lively debate amongst analysts today over whether or not global interests would be better served by creating one supranational global currency. Proponents argue that having such a currency, unlinked to any particular nation, could create greater economic stability and fairness in the world. These thinkers offer a variety of ways through which a new global currency could be developed. Some suggest a reserve currency that builds on the already existing Special Drawing Rights of the International Monetary Fund. Others call for a new currency issued by a world central bank that would resemble the EURO in terms of it being jointly produced and maintained by many nations.
Those against developing a global currency argue that worldwide international relations cannot be compared to the relations between European Union member states. True international consensus on issues vital to the creation and proliferation of a global currency, they believe, is not realistic in today's political climate. Some also argue that instead of improving stability and bettering the distribution of wealth in the world, a global currency might undermine the sovereignty of smaller or economically developing nations.