China Pushes for Esperanto Currency
Zhou Xiaochuan, China’s central bank’s governor, recently proposed that a new international super currency be created to replace the US dollar as the international reserve currency. The currency, which I call “Esperanto Bucks,” would be tied to the Special Drawing Rights (SDR), a weighted basket of currencies the International Monetary Fund (IMF) currently uses for accounting purposes, and little else.
I get that there is a lot of downside to being overly dependent on a single currency–especially dollars right now. I similarly understand that China is really worried that the country has pursued an export-based growth strategy that has left it hugely over-leveraged in US dollars. It is now stuck in the situation where leadership would love to diversify, but failing to continue buying dollars at a fast rate would leave open the possibility that the value might fall. The result would be huge reserves of money with diminishing worth.
From this perspective, I get why China is interested in reducing the importance of dollars as the international de facto currency. Of course, I also understand why people don’t want English to be the official international, and instead would prefer to use a super language. You may remember that there was, in fact, a move toward an international language that everyone could use. It was called Esperanto. And aside from one guy I met in Xinjiang a few years back, no one in the world uses it anymore.
It is quite easy to explain why China’s proposed Esperanto Bucks are no more useful than the original Esperanto language. A universal language s0unds great in theory, but you have to teach people to use it. Plus, you need to reach critical mass. People study French and Chinese than Latvian because more people speak French and Chinese than Latvian. The problem is prevalent in all parts of life. I bought a mini-disc player in 2000 because I figured everyone would be using them. Let’s just say that the iPod reduced its usefulness.
With a new currency, there has to be some inherent belief that everyone will buy into it. If China wants to buy trillions of spacebucks, that’s fine, but I’ll pretty happy to keep my money in dollars. Or Euros. Or Yen. And therein lies the problem. You can’t convince people that Esperanto Bucks are the new world currency unless someone believes in them. With dollars, everyone believes in them because they are accepted everywhere. North Korea counterfeits them, for crying out loud. Even countries that hate America still believe in its currency.
The other obvious problem with China’s idea is that many of the problems that its leadership now confronts relate to the country’s aversion to floating the Renminbi. There is no particular reason why China has to or should inherently float its currency, but there are real repercussions in not doing so. Specifically, in order to target an exchange rate, policy needs to back up that goal. In this case, that means buying huge amounts of dollars, and to a lesser extent, Euros, to ensure that their isn’t too much upward pressure on the Renminbi.
Just as the US is dealing with many of the problems that have emerged from a decade of over-leveraging, so too is China. But the proposed path forward makes very little sense. In fact, the flawed logic of such a system is clear in the opening paragraph of Mr. Zhou’s initial statement:
…what kind of international reserve currency do we need to secure global financial stability and facilitate world economic growth, which was one of the purposes for establishing the IMF? There were various institutional arrangements in an attempt to find a solution, including the Silver Standard, the Gold Standard, the Gold Exchange Standard and the Bretton Woods system.
All of these systems collapsed. The Gold Standard, which was the one that lasted the longest, essentially limited the viability of monetary policy and the total amount of currency in the world, regardless of population expansion. But the most similar system to the one Mr. Zhou proposed was Bretton Woods, which itself collapsed 40 years ago. Ironically, SDRs emerged in the aftermath.
Even the IMF’s limited use of SDRs shows how useless the system is and how limited it Esperanto Bucks would be. If SDRs were such a great system, one might think that the IMF would use it widely. In reality, it is little more than an accounting tool, backed by no government and used only for purposes like standardizing international postage and costs for luggage.
If I were to create a model for Esperanto Bucks, perhaps I would not use the postal service and baggage check systems as models. Maybe I would use the most widely used currency in the world, the one that people continue to trust in bad times.
Here a number of good links about this that I used as references but was not able to link to in this post:
James responds:
Posted: April 6th, 2009 at 11:23 am →
I’m assuming that by the most trusted currency you mean the Euro right? Because the whole point of the move towards the “Esparanto” is that many people don’t trust the dollar anymore, what with the government’s economic policy of simply printing more money to pay off debts.
Hek responds:
Posted: April 6th, 2009 at 11:50 am →
Yo! what a great idea! We should have North Korea printing the notes since they already do such a good job of counterfiting US currency!
HEK
Josh responds:
Posted: April 6th, 2009 at 4:53 pm →
@James:
You sure? The dollar is much stronger than it was a year ago–before the crisis.
Bill Chapman responds:
Posted: April 6th, 2009 at 6:19 pm →
I think you are being a little unfair to Esperanto – there was a typo in your spelling of the language’s name.
I speak Esperanto and use it a lot on my travels. It’s hard to know how many people speak it. A couple of million, I suppose, is a fair guess. Take a look at http://www.esperanto.net for information on this underrated planned language.
Brian Barker responds:
Posted: April 6th, 2009 at 10:55 pm →
I agree with Bill Chapman. It’s a pity so few people have heard of Esperanto.
If you have a moment you might like to see http://video.google.com/videoplay?docid=-8837438938991452670 and a glimpse of the language can be seen at http://www.lernu.net
Remush responds:
Posted: April 8th, 2009 at 1:25 am →
“A universal language sounds great in theory, but you have to teach people to use it. Plus, you need to reach critical mass.”
Thank you for acknowledging that Esperanto is great in theory…
The big problem with “natural” languages indeed, is that they have to be painfully taught, and only masochists can endure the pain that long.
It’s easier to convert money than to translate to another language.
Therefore, an easy to learn constructed language would be more valuable than a common currency.
Note that the € was also good … in theory but, according to UK, was bound to fail.
Do you realize that there is very little to do to reach the critical mass?
Just publish in all European newspapers, on the front-page, an article titled: “The EU considers that Esperanto is the best solution to improve multilingualism”.
Lots of people would start learning it and in less than two years, you’ll have your critical mass of speakers, teachers, writers and movie stars, without any other investment.
4 years later, the Esperanto Academy would be located in China.
ЄЭ Remuŝ (Belgio)- perSkajpe: RemushBE
Remush responds:
Posted: April 8th, 2009 at 1:47 am →
“And aside from one guy I met in Xinjiang a few years back, no one in the world uses it [Esperanto] anymore.”
See http://www.espero.com.cn/ to convince yourself of the contrary.
For other countries use “Google”
Brian Barker responds:
Posted: April 9th, 2009 at 5:25 pm →
I see that President Barack Obama wants everyone to learn a foreign language, but which one should it be?
The British learn French, the Australians study Japanese, and the Americans prefer Spanish. Yet this leaves Mandarin Chinese. Hindi and Arabic out of the equation.
I think it’s time to move forward and teach a common neutral non-national language, in all countries, in all schools, worldwide?
An interesting video can be seen at http://video.google.com/videoplay?docid=-8837438938991452670.
Hao Hao Report responds:
Posted: April 14th, 2009 at 7:34 am →
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Ryan responds:
Posted: April 14th, 2009 at 7:45 am →
Wow Josh, who knew you had so many Esperanto-savvy readers!
I definitely see your point about it being a challenge to implement something against the natural flow of how we usually adopt something (through necessity). But I disagree that it can’t be done, and I’m also leaning towards the camp that feels it should be done.
China had silver, Europe had gold, America had dollars – why not usher in a new model for a new age? That it might not be naturally adopted just means that it will need to be creatively deployed.
The Esperanto concept of creating a non-national form of communication would be a great leveler in the minds of the nations that feel the US, and/or “developed” world, control all the shots – stands to reason that Esperanto bucks would do the same.
Of course, then we might be falling right into the claws of our evil 12′ lizardmen overlords… depends where your beliefs lie, I suppose.
Collin responds:
Posted: April 14th, 2009 at 10:49 pm →
The problem with the “Esperanto Currency” (super-SDRs) is who controls the exchange rates? The interest rates? If it is the IMF, many nations will scream foul as the IMF is pretty much controlled by the EU and America. If they opened it up to more voices, there will be much political pressure put on the organization to adjust rates in a way that help a nation’s domestic economy, often at the detriment of another. There is a reason most central banks are semi or fully independent from national politics, because what is good for the economy is not always politically viable as the whims of the populace are fickle. This is also true for nation states when dealing with international institutions. I just don’t see how this is workable.
nanheyangrouchuan responds:
Posted: April 29th, 2009 at 2:18 pm →
It’s sad that what should have been a discussion about international monetary policy turns into some cheap promotion for a false “language” that has less culture behind it than some old computer languages. The natural languages tell the story of human social and economic evolution, esperanto is a fraud with a fake culture, a bunch of world beat loving weirdos that make up baby talk and call it a language. As much as I bash China, I am proud to be functional in one of the founding languages of humanity. I’d rather speak baby talk to a child than waste my time with esperanto. And it is untrue that Chinese, Hindi and Arabic are ignored. Chinese and Arabic (another founding language) are trendy languages and are taught in the mid to upper level school systems (though hopefully by democracy loving Taiwanese). Hindi (another founding language), well, since India uses their own version of English (another real language with a real history of human migration behind it) you can pretty much just show up in India and get around the first and second tier cities fairly easy and student translators are easy to come by.
For an example, esperanto has no comparison to the grass mud horse or river crab double entenders and the social roots and significance of those seemingly harmless words.
nanheyangrouchuan responds:
Posted: April 29th, 2009 at 2:22 pm →
As for China calling for a global currency, they again fail to let their currency fluctuate with market conditions, instead, they want the world to solve their problems for them. They decided to peg the RMB to the dollar AND to have an export driven economy. At the recent G20 summit, the PRC balked at having to donate to the $1 trillion USD development fund for the poorest 30% of nations but still wanted an equal position alongside the EU, US and Japan, who donated the lion’s share of that fund.
Bad, greedy, selfish China.
remus responds:
Posted: May 8th, 2009 at 9:37 pm →
to nanheyangrouchuan : about “baby talk and fouding languages”
see http://remush.be/etimo/etimo.html to convince yourself that the baby grew to a considerable size. Try and find a word that has not deep roots in the original languages of humanity.
What is obvious is that the dollar cannot be used as the global currency, no more than English can be the global language.
The reasons are the same: a currency or a language pertaining to a nation cannot serve the world and the nation at the same time.
Refer to http://lingvo.org/en.php
Who believes that “What’s good for America is good for the World”.
Remuŝ