The Terra TRCTM White Paper
A solution to global monetary insecurity?
The time is coming to envisage a global monetary system that goes beyond the simple dollar domination of the past sixty years. Even Paul Volcker, ex-Chairman of the Federal Reserve Board, is now acknowledging that “The ultimate logic of economic globalization is a stable and common unit of account … in other words, a common world currency », i.e. something else than the US$.
Indeed, three unresolved issues are haunting the global monetary scene. Firstly, there is no international standard of value - a critical function of any money system. The US$ has stopped playing that role since the floating exchanges of the 1970s, and no other currency has been able to fill in that gap. Secondly, currency instability persists. According to the World Bank, 87 countries have experienced monetary crises in the past 25 years, and still counting. One of today’s biggest questions is whether a US$ drop in value will end up in a hard landing that will unsettle the entire global system. Thirdly, institutional deadlock: the banking system isn’t pushing for monetary reforms because “hedging” products (insurance against monetary instabilities) constitute significant profit centers.
The TERRA Currency
One solution is what the International Air Transport Association (IATA) successfully did 25 years ago through internal currency arrangements among its members, i.e. it created its own Trade Reference Currency (TRC). What is proposed here is to implement a general trade reference currency, useable across industries. Furthermore, this TRC would be designed to provide an inflation-resistant international standard of value, stabilize the business cycle, and realign stockholder’s interests with long-term sustainability.
This Trade Reference Currency – let’s call it a ‘Terra’ - would be backed by a standard basket of the most important commodities and services traded in the global market (e.g. oil, wheat, copper, gold, etc., and some standardizable services like carbon emission rights, international freight or telecom units.) The Terras would be issued by a Terra Alliance as electronic inventory receipts for commodities sold to it by producers. This Terra Alliance could include both governmental and private sector actors who represent the main producers or users of the components in the basket.
The cost of storage of the physical commodities would be paid by the bearer of the Terra (estimated at 3.5-4% per annum). This makes the Terra a ‘demurrage’ currency, which encourages its use as a contractual, planning and trading device, not as a store of value.
What are the benefits of such a TERRA compared to conventional money? First of all, the three issues identified above would be resolved. Terra would indeed be an ideal standard of international value, given that its basket would capture main elements of global trade. By the very definition of a basket, it would be more stable than any component of the basket (such as gold or . It would also be a robust standard, given that it is a fully backed currency. Finally, as any TERRA trade is basically standardized countertrade (international barter), it doesn’t require new legal agreements. Countertrade is routinely practiced today in over 100 countries, with a volume of more than $1 trillion per year. The Terra would operate as a complement to conventional national currencies, in parallel with them.
There are also three additional benefits to the Terra approach. By definition, it would be an inflation-resistant currency, ideal to track results over long-time periods or across countries. In addition, the Terra would be counter-cyclical to the conventional money creation process, thereby stimulating the world economy in downturns and cooling it off in boom periods. And, last but not least, the demurrage feature would realign financial interest with long-term thinking, thereby resolving the conflict between shareholders’ optimization and long-term sustainability.
To read more about this mechanism and the evidence for its claims, consult the Terra White Paper obtainable via www.terratrc.org .
