This. Monetary unions need to follow political unions, not the other way around. The problem in europe is that they can't just print the currency of the nations that were irresponsible. If they could do that, there would be very little problem (just localized inflation). Instead, since responsible countries in Europe don't want to suffer because of the Mediterranean profligacy, they need to go with the often counter-productive austerity measures and debt renegotiation (declaring insolvency). With a global bank the problem would be worse. I'm okay with a concept like the SDR (a basket of currencies) for currency reserves and commodity pricing, but sovereign nations need the power to print their own paper. It seems clear however that the global economy needs to be decoupled from the dollar. It would be better for everybody.

>> ^NetRunner:

I think a) it's obviously politically impossible, and b) a global monetary union would be harder to pull off than the euro monetary union, and the euro is headed for collapse as it is...

While the yuan is tentatively pegged to the dollar, it's hard to argue anything has changed.

A currency needs years, decades even to gain reserve currency status. With the current debt instability in the Euro area, this has become a very unlikely proposition. The yuan is even less likely, partly because currently it is still essentially pegged to the dollar and partly because it still far, far from being the pre-eminent power with massive income disparity comparing the cities to the countryside, unstable regions, and even purely festering structural issues like water shortage and pollution. What's more likely is it being replaced also in the medium to long term by the IMF Special Drawing Rights (SDR), basically an amalgamated currency with proportionate representations by major economic world power currencies.

The thing is though if the US were gradually replaced by other (or combination of) currencies it would be quite beneficial to the US economy.

The main effect would be a depreciation of the US dollar. The US dollar is in excessive demand because it is used in trade internationally, something that hurts US export competitiveness. A currency depreciation would make imports less competitive and exports more competitive. Less incentive to overconsume Chinese manufacturing, more incentive to export products thus improving the US trade balance and foreign debt.

Slight inflationary pressure. Currently deflation is a bigger worry, especially if it becomes entrenched as in Japan.

Public debt? Largely wouldn't be affected because it is predominantly denominated in US currency (Treasury bills) thus currency value does not play into the equation.

Point is, it's largely a good thing.