The dollar has already been toppled as the world's leading currency
IN DECEMBER 2005 , we warned that the dollar's role as the world's main currency was under threat if America continued in its profligate ways. Yet the dollar has been dethroned even sooner than we expected. It has been superseded not by the euro, nor by the yen or yuan, but by another increasingly popular global currency: frequent-flyer miles. Calculations by The Economist suggest that the total stock of unredeemed frequent-flyer miles is now worth more than all the dollar bills in circulation around the globe.
By the end of 2004 almost 14 trillion frequent-flyer miles had, by our estimate (updating figures from webflyer.com), been accumulated worldwide. But what is a mile worth? Airlines sell them to credit-card firms at an average of just under 2 cents a mile; their value when used to buy a ticket or to upgrade to business class can be anywhere between 1 cent and over 10 cents per mile. Using the mid-point of this range means that the global stock of frequent-flyer miles is now worth over $700 billion, more than all the dollar notes and coins at large. Pedants will complain that we have ignored dollars sitting in bank accounts, but after a couple of free in-flight gin-and-tonics, most frequent-flyers care little about the difference between M0 (the narrowest measure of the supply of miles, or rather, money) and M3.
Source & Copyright © 2005 The Economist Newspaper and The Economist Group
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