Gold and Bretton Woods - previous attempts at a global currency?

One could argue that the original global currency was a commodity that nations around the world valued and trusted - gold. But there is no asset or currency in the world - gold or otherwise - that can be completely trusted in commerce and exchange, given the propensity for humans to engage in counterfeiting. This would lead to the standardization of coins, minted by the sovereign, and subsequently shaved and clipped, at which point 'seignoriage' entered our vocabulary.

And therein lies one of the issues facing attempts at a global currency - trust in the issuer. If an English citizen receives a gold coin minted and standardized in Spain - does she even know who the King of Spain is? And how sharp his clippers are? This international standardization has actually now been achieved for gold as a wholesale commodity, through London Good Delivery standards managed by the London Bullion Markets Association - but was never achieved when gold was considered, and circulated as, currency.

Stablecoins may enjoy the luxury of being electronic, but they are still clippable if there could be circumstances where the currency is not, at all times, fully backed by a basket of existing currencies or assets. And if we cannot immediately or effectively verify whether or not a stablecoin has full backing (how do we know what the King of Facebook is up to?), then how much can we ultimately trust the currency? Particularly when the King does not have access to the printing presses of the underlying currencies.

Bretton Woods

Should the Bretton Woods Agreement be considered the birth of a de facto global currency? Dozens of countries agreeing to peg their currency to the US dollar, while in turn the US dollar pegged to gold. So in effect, one could theoretically travel to any of these participating countries without worrying about exchange rates. In which case Bretton Woods could have just created a whole new international currency - which it effectively balked at by substituting the US dollar as the international 'reserve' currency.

The Bretton Woods system lasted less than thirty years, brought down by its own design when the US inflated its currency as a result of the Vietnam war, and then broke the link to gold. But this was not after considerable efforts to plug holds in the leaky system, such as when the IMF introduced Special Drawing Rights (SDRs) in 1969 as a supplementary international reserve asset.

Which leads to another issue with the creation of a global currency - the need for flexibility. A global currency will almost certainly need to be a derived asset given the need for countries to manage their own money supply to address geopolitical, financial stability, or other issues that are often endemic. Currency needs to bend, and the issues faced by the IMF in supporting the Bretton Woods Agreement show what happens when you try to prop up an unnatural system - at some point the dam breaks and the system seeks its natural equilibrium.

And now it seems obvious the importance of floating exchange rates which provide invaluable market information on the state of economies around the world, and our trust in them.

Exchange rate volatility (flexibility) will persist. Will a stablecoin be able to manage this volatility in a sustainable way? And solve the inherent challenges of trust and flexibility faced by a global currency, in order to reap the benefits that a global currency purports to provide? All while figuring out how to scale a currency without having control over the supply of the underlying basket, a challenge that even the IMF struggled with during the Bretton Woods era?

Sovereign attempts at an international currency model in the 20th century could be considered a failure. Private sector technology providers are now thinking of giving it a try.

Good luck to the King of Facebook.