Is this just another cryptocurrency?
The Global Reserve System (GRS) does give a stable value to crypto coins on the global dollar standard, but it is not fundamentally a cryptocurrency. Many different coins from various providers can be on the standard at one time, as can non-crypto assets like over-the-counter notes or even bank accounts.
What makes the global dollar an international trade currency?
International commerce is the most obvious place where the global dollar is needed, as a unit based directly on global investment opportunity cost effectively avoids being a source of currency and interest rate uncertainty. Every national currency – even the ‘home’ currency – represents a speculative risk to financial value. The essence of currency risk is not the relationship between one currency and another, but between money and financial wealth.
Isn’t this just a version of the gold standard?
There is some similarity, in that the monetary unit represents a real, redeemable asset. There are many reasons why gold is not an ideal basis for money, one being, oddly enough, that the value of money starts to drive the price of gold rather than the other way around. There probably isn’t enough enough gold in the world to serve this function effectively anyway, which is why gold standards have rarely been 100% backed. Also, gold traditionally offers stability but at the cost of poor returns. The Global Reserve Portfolio (GRP) does include a small (10%) share of gold as a stabilising element, but this is in the context of a balanced and diversified selection of financial assets. Gold alone is not a good approximation of international investment opportunity cost.
Why a ‘reasonable rate of return’ instead of the risk-free rate of interest?
There is no such thing as a risk-free rate of interest, certainly not one denominated in a conventional currency. This is not just a matter of governments failing to pay their debts, although that does happen. A more fundamental problem is that fiat money does not refer to any specific amount of real wealth. The financial value of repayments depends largely on the momentary value of the currency itself, one of the great mysteries of the modern world. The global dollar has an implicit rate of return that reflects the full range of financial opportunities practically available to an international investor. There are many ways to define risk, but this is about as reliable and ‘reasonable’ a rate of return as we are likely to find.
Is there a risk that that system will collapse and take our money with it?
GRP assets will be independently managed and valued by a custodian, and subject to regular audits. Liabilities will exactly mirror assets as a matter of design. The portfolio itself will be balanced between asset classes and highly diversified within those classes. It is not designed to protect against all loss of value, but to provide a robust proxy for investment opportunity, which depends largely on the global economy itself.