Introduction
The modern monetary order is a battlefield between national interests and technocratic rationality. Robert Mundell proposes a revolutionary solution: treating the globe as a single closed economy with its own monetary constitution. This article analyzes the concept of "paper gold" and the optimal world bank, designed to replace currency anarchy with a system based on trust and efficiency. You will learn how Mundell’s vision deconstructs myths about the dollar and debt, and how contemporary projects like CBDCs or the BRICS currency are implementing this visionary program.
Mundell's Planet: The World as a Closed Economy
Mundell postulates the establishment of a supranational bank that would issue "paper gold"—an international reserve asset based on bullion but not limited by its physical quantity. Traditional gold is economically wasteful, as it ties up wealth in the form of a sterile reserve. In the new system, the central bank invests assets in interest-bearing instruments, allowing for the payment of interest on world money. Consequently, the private cost of holding reserves aligns with the social cost, which is a prerequisite for system optimality.
This approach exposes a contradiction: it is impossible to simultaneously maintain gold as a rigid anchor and minimize the cost of money. Mundell suggests an evolutionary path—building trust through initially high bullion reserves, eventually transitioning to a full paper system. Trust in this model is not the result of a decree, but the stabilization of practices within the lived world.
The Optimal World Bank: An End to Currency Anarchy
A key element of the theory is the deconstruction of the myth of dollar devaluation. Mundell demonstrates that unilateral exchange rate cuts by the US are neutralized by trading partners, and the dollar effectively serves as a universal denominator of value. Instead of manipulating the price of metal, we need common rules for issuance. The Pigou effect plays a significant role here: money is an active component of wealth, and changes in its real value (purchasing power) directly influence consumption and savings decisions.
In Mundell’s model, inflation acts like a tax that forces savings and lowers real interest rates. However, the author warns against a disinflationary shock. Abruptly braking the money supply while velocity is falling is a direct path to depression. Instead of "pulling the emergency brake," the system’s conductor should gradually phase out monetary expansion, synchronizing it with the reversal of social expectations.
Paper Gold: From SDRs to the BRICS Currency
Today’s SDRs (Special Drawing Rights) are a prototype of Mundell’s currency, and central bank digital currencies (CBDCs) technically enable the implementation of interest-bearing money. Even the BRICS currency project can be interpreted as an attempt to redistribute the privilege of issuing "paper gold" from Washington to new centers of power. Mundell views public debt as a useful net asset that corrects capital shortages in the private sector, provided the tax system is properly coordinated with monetary policy.
However, this theory has limitations: Mundell underestimated the power of financialization and the resistance of states to losing sovereignty. Cultural differences, such as uncertainty avoidance or power distance (evident in various jurisdictions, e.g., the differing approaches in Israel and France), affect the readiness to adopt global regulatory norms. Nevertheless, the proposed three-stage evolution—from strengthening the SDR to a global unit of account—remains the only alternative to chaotic multipolarity.
Summary
Mundell’s vision is a test of whether collective reason is capable of consciously shaping the global order. The alternative is drifting toward a world where every currency and payment system becomes a geopolitical weapon. While establishing a world central bank seems utopian today, in the long run, we will either create institutions capable of managing the planet as a single economy or remain condemned to a permanent cycle of crises, depressions, and accidental devaluations. Mundell’s "paper gold" is not just a technical construct, but a call to transition into an era of mutual recognition and shared rules of the game.
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