[jandrewrogers]

Interestingly, the relative weakness of reserve currencies has made this plausible in a real way. As the debt risk of countries becomes closer to the strongest multinationals it creates the possibility for the debt of multinationals to be lower risk than any currency it can be denominated in, which happened briefly a couple years ago for the first time ever. In effect, the debt instruments are currency.

Right now, governments have the ability to inflate their currencies to pay for their excessive spending. If non-governmental instruments become stronger than reserve currencies then it will create a novel situation where they can't inflate away the debt even if every other government is doing it. That is new territory. Companies that generate and preserve value on a global basis will have financial instruments that are de facto currencies, much in the way gold is.

That would be an interesting time.

[danmaz74]

National currencies are legal tender in the issuing nation (or in EU Euro states, in case of the Euro), while everything else isn't. This makes a lot of difference.

[JumpCrisscross]

Companies do have "currencies" that can hold value independent of FX - secured bonds. Otherwise, commodities take the role of liquid non-fiat value holders. Substituting a government-backed currency with a corporate-backed one is a terrible idea given that a corporate is subjugated to a sovereign (and pays its debt in sovereign currency [ignoring the marginal role in-kind bond payments play]). Thus, one is accepting an inherently inferior proposition.

It should be noted, though, that many multinationals' bonds trade healthier than many sovereigns' currencies.

[justincormack]

Er, bonds are denominated in currencies. There is no independent value.

[JumpCrisscross]

One can just as easily say that currencies are denominated in assets. When valuing a currency one inevitably resorts to trade flow and capital production statistics. A better way to think of these flows is as swaps instead of "buying" things with money.

In the modern banking system Treasury bonds function just as much as money as Federal Reserve notes (which are technically a debt). Before the crisis AAA corporate bonds were accepted as collateral nearly on par with Treasury bonds.

[jandrewrogers]

The above is why this only applies to truly global multinationals that have their assets liberally distributed around the world. The risk exposure of a single government going rogue is mitigated by any particular government only having access to a fraction of the assets. If several governments go rogue at once then you have bigger problems to worry about.

[JumpCrisscross]

True - I just assumed multinationals given that the discussion is on sponsoring units of account to compete with sovereign currencies. I should have been clearer about that.

[gaius]

I believe under either Solvency II or Basel III regulations, a corporation can't have a higher credit rating than its sovereign (e.g. whose currency its debt is issued in). But nevertheless, you are correct - it can have a better rating than sovereigns other than its own. Would you rather be holding BMW or Greek bonds right now, tho' they are both denominated in Euros.

[Drbble]

How is that debt denominated in non-national-currency? In shares of stock?