Friday, April 05, 2002
Times Colonist (Victoria)

OTTAWA -- Canadians should think bigger than working for a single North American currency and begin building consensus toward a single world currency, says Robert Mundell, the Canadian-born Nobel Prize-winning economist.

"A global economy requires a global currency," Mundell said Thursday during a speech at Carleton University's Sir John A. Macdonald lecture series. "The optimum currency area is not North America, it's the world."

During his 100-minute speech, Mundell, an economics professor at Columbia University in New York, delved deep into economic history to explain how the emergence of the United States led the world away from the gold and silver standards of the 18th and 19th centuries, where exchange rates were essentially fixed, to today's world of mostly flexible currency valuations.

Using his concept of optimal currency areas -- a theory he developed in the late 1950s that examines the geographical area in which a single currency would be most effective -- Mundell said a North American currency would be largely impractical and that the best thing for the world would be to gravitate toward a single currency.

"I am not an enthusiast of a single currency (for North America) that is different from the U.S. dollar," Mundell said. He said that the U.S. would never agree to give up its dollar, which was the dominant currency of the 20th century and will probably retain that position in this century.

Instead, Canada should fix the loonie's value to the U.S. and begin urging other countries, notably members of the Asia-Pacific Economic Cooperation forum, to do the same. He said with APEC, which would include China, Japan, Singapore, Canada, Mexico, Peru and Chile, all pegged to the U.S. dollar, more than half of the world's economic production would effectively be under one monetary system. Meanwhile, in Europe, the euro would continue to stabilize and would eventually be predictable in its valuation when compared with the U.S. dollar as well.

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