The Disadvantages of Sovereign Currency as the World Currency

Abstract

From the perspective of Marx’s theory of the functioning of the international monetary system, there are inherent disadvantages in a sovereign currency acting as the world currency. First, the existing model of the single world currency is unfair, with the country whose sovereign currency functions as the world currency able to obtain huge international seigniorage and international inflation tax. Second, this single world currency model is unstable. The premise behind the functioning of an international monetary means of payment is the strong credit of currency-issuing countries, but the Triffin problem means that the sovereign currency issuers face a dilemma. Third, the duality of the monetary measure of value determines that there can be only one currency performing the function of a world currency in the international market, and a multipolar world currency pattern will lead to frictions among currency-issuing countries. Recognizing the disadvantages of using a sovereign currency as the world currency has important reference value and educative significance for achieving a correct view of digital currency, eSDRs, and RMB internationalization.