Proposal for a Balanced and Stable International Monetary System

This paper proposes a new model of a shared international monetary system (IMS) that could potentially make the IMS balanced and stable. We call it an “organic system”. The organic system issues a cross-border means of payment called “organic currency”. The organic currency is only for international transactions between member countries. Domestic transactions continue to use their respective national currencies. Non-member countries cannot use the organic currency. Organic and national currencies are interchangeable using an “auto-balancing” exchange rate that follows the fundamentals. We utilize a trade-and-investment simulation involving 5 countries, 20 products, and a 12-month to test the system. Our simulation shows that this model could provide international liquidity to all (member) countries in the world sustainably, eliminate global imbalances, make the IMS naturally stable, and FX reserves tend to be self-sufficient. This system is flexible; it can start from anywhere in the world and any country may join.