The global dollar is the only currency that is tied directly to global financial wealth, making it a better medium of exchange for international commerce. The value of national fiat currency through time is essentially unknowable, but the global dollar is a stable measure of wealth defined by available investment opportunities around the world. Money is only one class of financial asset; a general rise in other asset prices can also be described as a fall in the value of money. Individual national currencies rise and fall relative to other financial assets and each other; there is no ‘home’ currency that is immune to risk if the ultimate concern is global financial wealth. A stable nominal value in Australian or US dollars, such as a debt, represents an unknown measure of financial value in the future. The absence of this financial currency risk makes the global dollar the only properly international currency unit.
The global dollar is a stable measure of financial value not only around the world but also through time, making it a better unit of account than anything previously available. Global dollars make discount rate estimates and ‘time value of money’ calculations redundant. Adjustments occur in real-time through the value of the unit, avoiding the need for forecasts and inevitable forecast error. A global dollar this year is financially equivalent to a global dollar in any future year. This property also simplifies the measurement of financial performance, as investment assets will rise and fall in nominal value relative to their performance against the global portfolio standard.
The global dollar gives an implicit ‘reasonable rate of return’ without the need for explicit interest, making it a better store of value than any other currency, and arguably any other asset. It is now possible to eliminate the investment trade-off between liquidity and return. As a truly international medium of exchange, the global dollar promises the greatest possible liquidity. Being based on a balanced and diversified portfolio of financial assets, it also offers returns that are at least competitive with any other low-risk investment. In the absence of a specific speculative preference, there is no longer any need to reallocate funds away from money itself.
The global dollar also effectively establishes a ‘zero base rate’ of interest that is derived directly from the real world of investment opportunity, making it a better standard of deferred payment. There is no risk-free rate of interest; even if it is assumed that the US government will always meet its obligations, for example, there is no way to know what a US dollar will be worth when it does. Any debt denominated in US dollars is in effect a form of currency speculation, a problem that does not arise with global dollars.
The GRP is designed to approximate the global opportunity cost of funds given the most balanced, diversified, and non-speculative allocation reasonably available. There is therefore no need to estimate a future economic rate of return component of interest, as this will be reflected in the value of the currency unit. By largely eliminating the need for interest rate forecasts, the global dollar largely eliminates the interest rate risks that result from forecast error. Explicit interest is limited to compensation for the risk and effort involved in a specific investment, which effectively means a risk premium and a management fee.
The GRS is flexible about the form that the global dollar takes, and resilient to the failure of any given product. Member institutions will compete for a larger share of the money supply by issuing global dollars that are seen to be useful and reliable. The purpose of the GRS itself is to sustain a meaningful unit of financial value, leaving the various providers to improve specific technologies and services offered to the public. In this way it is similar to conventional monetary systems that have successfully adapted to decades of technological and institutional change. The global dollar ecosystem is able to evolve through competitive pressure.