Add the global dollar


#1

I have been working on a project that Revolut users should find interesting. It is essentially a number that is freely available on a website and RSS feed (so no, I’m not selling anything; this is more like an experiment in economic philosophy).

The global dollar is a virtual reference currency (not a cryptocurrency or anything like it). Basically it is a measure of value based on a ‘global portfolio’ of real financial assets rather than fiat currencies. It is not possible to buy or sell global dollars, but it is possible to give a global dollar price to conventional currencies and anything that can be priced in them. In other words, it is the sort of thing you can easily put into a currency converter, or use to add up multicurrency accounts and portfolios.

So why would you do this? Global dollar values are better because fiat currencies are a very indirect and unreliable measure of real financial value. Even home currencies create currency risks – what we really care about is whether our financial wealth has increased or decreased in terms of actual financial assets on a global basis. US$1,000 can mean anything depending on what the USD is doing at the time, so that debts, contracts, and prices in USD actually refer to an unknowable amount of real wealth. The problem is worse when currencies move together, as changes in financial value will not be obvious in the exchange rates.

Problems involving the time value of money, inflation, and foreign exchange risk all become largely redundant when global dollar values are used. There is no need to estimate a future discount rate, as discounting occurs in real time within the unit itself. There is also no need to adjust for currency effects, as the global dollar effectively bypasses fiat currencies to base its value directly on assets.

The ‘global portfolio’ is highly diversified both internationally and across asset classes (namely equities, property, bonds and precious metals), reflecting the global opportunity cost of funds. Each unit represents an accumulating share in this portfolio and remains financially equivalent through time, as it incorporates the expected economic rate of return, i.e., the return that you would get with an extremely diversified international investment. This is a far more meaningful measure of value than whatever it is that the other currencies are measuring.

Use of the global dollar as a reference currency is unrestricted. USD/GLB rates are updated daily at globaldollar.co and by RSS. I am currently trying to spread the word and explain how useful it is to have a direct measure of real financial wealth through time and through the veil of fiat money. It should be a fairly simple way to add quite a lot to customer value.