Technically possible, but countries generally want a level of control over their monetary policy and currency value that would disallow.
For some "control" means direct manipulation but for others they just dont want to inherit problems from other countries' economies.
Yes but the US has a centralized federal fiscal policy that redistributes money from high productivity (rich) states to low productivity (poor) states.
In a sense yes, but it was correlated to borrowing behaviors. You could say the opposite is the case now.
But what is definitely the case is that economies on the Euro (see: Baltics) are less dynamic than countries on their own currency (Poland / Czech Republic) overall.
With exceptions like Hungary and Turkey showing what bad management looks like if you want to try that.
No, for the one currency to work, you’d need some centralized power that controls the currency. That’s exactly why it won’t work, at least not for a very long time.
Depends on what controls you have on it. You'd need some kind of global financial authority which...yeah any country doing well probably isn't going to want to submit to. It causes enough friction just with the euro.
Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969. It operates as a supplement to the existing money reserves of member countries.
https://www.imf.org/en/Topics/special-drawing-right
CO2e Emission Certificates traded over the Emission Trading System worldwide: generated when 1 ton of CO2equivalents is removed or prevented from entering the atmosphere.
1 CO2eq cerificate is worth about 60€
This is....beyond my ability to tldr more than I did above. So here's a longer version.
The value of money is based on the belief that it's worth something. That's it.
If you have the kind of money accepted in a big, stable country like....for example the US where I'm from, then you can be very sure that you can always get all kinds of different things for your money. Further, you can be pretty confident that what a certain amount of that kind of money gets you doesn't change all that fast. And yes, we had an inflation spike but that's after decades of very low inflation and the US got hit less than most.
On the other hand if you have money that is accepted in a volatile or limited economy, like say Haitian Gourdes right now, then you can't be sure exactly what you can buy with it and how much it will cost you.
Countries want to have their money be stable and reliable. They want people to want their money. It provides advantages when trading with it and it also encourages investors to buy their government bonds because they can be confident want those bonds will be worth and what they can get with them when they pay out. Even more, if other countries, either their populations or their actual government, acquire a bunch of your money or bonds or other things that pay out in your money then those countries now benefit when you are doing well. Thay encourages good trade deals, avoiding diplomatic and especially military conflict, all sorts of things.
Countries CAN affect what happens to their money and economies. They can play with interest rates to affect the rate at which people take on debt, which can raise or lower inflation because it affects how much liquid funds people can spend on the same things that are our there. They can take action to affect employment, trade, all sorts of little factors that add in to it. They like having that control. Authoritarian regimes that don't mind messing with markets like China can directly mandate things like prices.
If you have everyone on the same currency, all those controls go away. Currency in the US, Australia, Japan, etc... all become subject to the economic happenings in Venezuela, Haiti, Zambia, Russia, Turkey, wherever.
They DO NOT want the problems those countries have. They don't want to lose out on the soft power financial advantages of being a stable currency. They don't want to lose control over their currency.
Now, of course, this would also be a boon to countries that currently have volatile currencies. They would get to ride the wake of those larger economies a bit. This tradeoff has happened within the EU and it's extended trade union several times.
But...if you wanted to install a world currency who is more important to have backing your idea: the EU and the US who would take a hit from it or Venezuela and Zambia who would benefit?
Wait: I thought of an actual explain to a child.
You know how people would like...trade things from their lunches?
If mom sends you with a snickers bat or the good cookies every day a lot of people will want it and you can either keep it or trade it for basically whatever you want. Even if you have a nut allergy and arent going to use it yourself just having it to trade gives you lots of options.
Some other kid whose mom gives him licorice every day, he doesn't have those options. He might be able to trade with like one person or maybe have to give over his whole lunch for one snickers bar.
If the school suddenly said "okay, no sending desserts to school, we will provide everyone with a plain Hershey bar" then you, as snicket bar kid, both took a downgrade and lost all your trade options. Licorice kid is probably stoked, though.
Places like the EU and the US have cookies and snickers.
Places like Haiti have licorice.
Probably not 3 but I’ll try my best:
Your teacher gives stickers to you and your classmates when you behave. You can give the stickers back to your teacher in return for certain benefits, but mostly you will trade them with classmates for small favors or items like chocolate milk.
Your teacher has some control over what items are worth as she can give more stickers, or she can make it more interesting to give them back to her.
Now imagine another classroom uses the same stickers, but the teacher’s kid is also in that class. She could give him extra stickers that he can trade for some items from your class. Suddenly your stickers are worth less because there are more stickers in your classroom now, but you didn’t get more.
Or imagine another classroom that uses the same stickers. They have a huge shortage of chocolate milk so they start buying your classes chocolate milk, but there’s not enough for both classes so now it’s more expensive and you get less chocolate milk with the stickers you get.
If they had different stickers, your classroom could tell the other classrooms that they need more stickers to buy chocolate milk, because you can’t do much with their stickers, and your classes chocolate milk wouldn’t become much more expensive for you.
Huh? Some places engage in very direct currency manipulation. It's well documented fact.
The ones that don't are still trying to influence it indirectly with things like government spending and interest rates.
By the same logic, potatoes are also world currency. Some people accept it as tender, some don't; same with bitcoin. I think more would accept potatoes than bitcoin though. Not against bitcoin, i do own some myself.
Bitcoin doesn't work very well when the main mechanism for transferring it is constantly being subverted because it's too slow, inefficient, and expensive.
By this logic, _all_ currency is world currency. Cryptobros really don't have any clue wtf they're talking about.
edit: lmao this dude fuckin blocked me. It's okay. reddit blocks are a form of world currency.
Except virtually no one uses crypto*currency* as a currency. They hold it as a speculative investment expecting that their hoard of virtual coins will be worth more in the future.
If you know anything about economics, that's a terrible "feature" for a currency. Ideally a currency should depreciate by about 2% per year, aka inflation. This forces you to put your money to use by investing it into growing the economy.
If everybody hoards their money because it will be worth more in the future the economy grinds to a halt, which is what happened to Japan over what's now referred to as the "Lost Decades" of the 90s, 00s and 10s.
Fine to say, but let's be honest they're mostly speculative investments for now. it's just one more of many each individual person can choose to accept or value as the like.
OPs talking about a single world currency everyone would use. National banking all the way down to transactions between individuals.
When treasury bonds in major economies pay out in bitcoin then we can talk about if it meets what OPs on about.
That’s the same as every other currency. You can have US$ almost everywhere as well, change it to your local currency and pay with it where it is accepted.
The question was why there isn’t *only* one currency and your answer included "hundreds".
Crypto isn't a currency in the same way as dollars and euros, despite whatever semantic bs people like to say about the "arbitrary" value of government regulated money. I can also barter with anyone in the world, that doesn't mean my chickens are a world currency.
Look at the Euro for the problem.
Germany is an advanced manufacturing economy that wants a low, stable inflation and interest rate because they carry relatively low debt and want to keep interest rates down for their domestic consumers.
Greece is a more… *fiesty* economy that would do best with higher rates of inflation to help devalue their existing debt and drive more aggressive investment.
But with one currency you can’t have both, and bigger and stronger Germany beats up on Greece (again) and gets the policy they want - to the detriment of the Greek economy.
A country that has its own currency can set its own fiscal policy to whatever is best. Usually this is helpful in times of financial problems, but sometimes it gets mismanaged and causes an even more severe crisis. Venezuela would have been better off *not* having control of their currency.
I wrote more but then realized you already covered most of what I said and in greater detail, so I’ll just summarize pointlessly:
United States: Fiscal & Monetary Union, allowing it to somewhat deal with differences is rich and poor areas
EU: Monetary but not fiscal Union, leading to issues like Greece
One world currency would have all the issues of the EU, but on an even greater scale.
Even within the United States a single currency causes problems. Mississippi has entrenched poverty and would benefit from a weaker currency and greater foreign investment. New York has ballooning housing costs and a large financial sector it needs tighter monetary policy and less foreign investment.
Yes but the states do at least have mechanisms for transferring g some of the wealth from new York to missippi. It can do this with federal level benefits, investment and personal location. It also has easy ways (assuming political will) to create programs to directly create wealth and investment in those areas.
The eu doesn't have this power, at least to the extent the us does, it's a far loser union. Whilst it does have some programs for subsidies and locating investments these tend to not allow specifc advantages to one country over another (i.e farming subsidies) or tend to focus on areas with existing skills, such as its science programs where the vast majority goes to france and Germany (with the uk being the largest receipent of jobs pre brexit). Which are already among the richest countries in the eu.
The euro crisis could of been a lot less worse for greece had the germans just bailed them out and invested heavily in them. Like Germany did to it's eastern regions. But the eu lacks that fiscal union so Germany would have to want to help Greece. And it didnt.
You have similar issues in Zimbabwe and Panama which don't have their own currency and have a limited supply of USD. They have no control over monetary policy of the US and this USD.
The difference is the USD is very stable compared to other currencies so it won't have runaway inflation and in addition having a large surplus of hard currency internationally accepted is a major advantage and one of the main reasons they use it. Basically they trade internal control for stability. Which is also why the USD is the backup currency for countries with massive inflation problems, currently Russia, Venezuela, and Argentina all use USD as an unofficial secondary backup currency.
I’m very interested in how “remote work” impacts this. There’s lots of discontent in places like Idaho over tech-workers moving in during the pandemic and driving up house prices, but doesn’t such movement also add money to the local economy and relieve high prices in places like San Francisco? Surely that moves the needle on things like the New York/Mississippi problem of wealth and housing imbalance?
People in Idaho don’t give a shit about house prices in San Francisco. They do care about rich remote workers moving in and inflating their property prices
Just adding to this: people will be affected differently. The people feeling the negative effects of sudden property appreciation will be renters or people looking to significantly upsize the home the own. Someone who just bought a big house on mortgage right before property values suddenly appreciated would get a big windfall, at least on paper.
Point taken, up to a point.
But:
A) if it isn't their primary residence they can sell it and pocket the difference.
B1) if it is their primary residence, they can sell it and move somewhere with cheaper housing, and pocket the difference
B2) if it is their primary home they can sell it and downsize in the same market, pocketing the difference (think empty nesters or retirees)
B3) if it is their primary residence, they still have the new equity, and they can use their new paper wealth as collateral for a bigger/more favorable home equity loan.
B4) even if none of B1-3 applies, they are no worse off (except to the degree that property or if applicable estate taxes go up, or to the degree they are no longer eligible for financial aid because they are wealthy on paper)
For most regular homeowners, item B4 is all that applies. Property tax goes up. Most people don't want to minmax location, house size, etc., they just want a place to live.
> being as all other property has appreciated with your own, it’s worthless
If this was true, remote workers wouldn't have moved to Idaho; the values of the homes in Idaho would have already gone up in value becaues the values in San Francisco went up.
If you're willing to move to a lower cost of living area/area with lower property values, it's very valuable.
I have a friend that had his home appreciate significantly. He sold for a profit and rolled the equity into a home in a lower cost of living area, where his new home (again) appreciated significantly. He sold that home and moved again to a lower cost of living area and now has no mortgage for the more house and land. This was over an 8 year span.
Yeah, long term it's definitely beneficial, but you can also see similar dynamics in [Portugal](https://www.euronews.com/travel/2023/05/12/proto-gentrifies-are-digital-nomads-ruining-portugal), where people with jobs that are technically abroad can afford things people with local jobs can't.
> New York has ballooning housing costs and a large financial sector it needs tighter monetary policy and less foreign investment.
I'm not sure those two policy suggestions are the fix, the large financial sector is simply NYC's main economic output so it doesn't really need *fixed* (it's the main financial hub of the entire American economy, and to a good extent the global economy), and the ballooning housing costs are resolved by building more housing, which requires some kind of investment.
Adding to this, you have another problem.
* United States: Cultural union with one shared language.
* EU: Much more diverse cultures with a bazillion different languages.
By way of illustration: Athens to Stockholm is more or less the same distance as Miami to Minneapolis. Along that straight line alone, and ignoring the non-EU countries along the way, you'll find three different scripts (greek, cyrillic, and latin), you'll find six Indo-European languages (Greek, Bulgarian, Romanian, Slovak, Polish, and Swedish), and you'll find a completely unrelated Uralic language (Hungarian). If you head from Athens to Brussels instead, equivalent to Miami to Kansas City, you'll find six more languages (Croatian, Slovene, Italian, German, French, Dutch).
This means that immigration within the EU is easy from a legal standpoint, but is much harder in practice than immigration within the US.
Those are also only the major nationally recognised languages, not counting anything regional or on the dialect/language border (bavarian, romansch, or Luxembourgish for example)
Your comment is lacking a vital bit of history. The Greeks cooked their books and faked numbers so they could become a member of the Eurozone.
They would not have been able to adopt the Euro if they had applied with their real economic data.
This is something that’s been openly admitted by the Greek government btw:
https://www.nytimes.com/2004/09/23/world/europe/greece-admits-faking-data-to-join-europe.html
https://www.bbc.com/news/world-europe-16834815
There have been serious discussions about kicking Greece out after they threatened to default on their debt (which would have messed with the value of the Eurozone. Check this wiki article, and read the section about Grexit:
https://en.m.wikipedia.org/wiki/Greek_government-debt_crisis
And everyone knew that happened before they came in and didn't care. Because the Euro was a political project first with the economics as an afterthought until the recession happened.
Not the same person, but that's not necessarily it. Even with a single global government, there would still be reasons to manage different areas/situations with different policies. But if there was a single global currency, the governing body wouldn't be able to do much to avoid the main problem.
Not really. It's more that a world currency could cause a lot of problems unless the world was relatively economically equal.
(That's not to say it wouldn't have benefits! It definitely would have significant benefits).
Seems like things getting a lot more equitable, at least from my anecdotal point of view. Seems like we’re headed toward a one world government. What are you thoughts on that?
I agree. I mean, who can predict what the future will hold. I’m hoping AI won’t take us in the opposite direction but right now that doesn’t seem promising…
basically yes, financial policy is a huge method of control, and can even be used as a weapon. you have to have some central body in charge of it all, and whoever that was would have an unbelievable amount of power.
This is a fairly negative take though. It's not i correct by any means but is only one side of the story.
Greece as a country would have defaulted on their economic position if not for being able to piggyback of the larger stability of the Euro compared to what a Greek currency would be able to do on its own in order to pull yourself out.
A debt crisis like what occured in Greece is a consequence when the positive aspect you mentioned (riskier investments) fail to generate the economic growth you envision it would. That only leads to more debt.
There are other ways to get guarantees from other countries (for example the US could say that they guarantee Greek loans, meaning the US will pay the loans back to lenders if Greece fails to pay) but being part of the Eurozone means you are automatically guaranteed this process occurs as others are tied to you just as much as you are to them.
This also breaks down intra country.
Here in Canada, provinces like Ontario could use lower rates now that our inflation is easing. But Alberta needs higher rates due to higher inflation.
If you traded out all your US dollars for Swedish Kronor, you’ll have a hard time doing any business in the US. The government and financial institutions are only interested in their own currency. Private businesses will sometimes accept foreign currency in countries where it comes up a lot and the exchange rates are favorable.
You’d have a real hard time finding anyone willing to accept foreign currency in the US.
you may not know the difference as a private citizen who buys parsley in a convenience store, but when global scale money enters the picture - national reserves, large scale projects etc. any currency is just a commodity and some commodities are too volatile to be acceptable
USA exerts much of it's power because of the status of US dollar as the world's reserve currency
The exchange rate between those currencies change very often
This week you might get 1.25 kronor per 1 dollar
Next week it might be 1.18 kronor per 1 dollar
This variance is caused by the differing economic situations in those countries at those moments
As an individual investor, for USD and SEK, the only practical barrier is exchange fees. The US and Sweden have relatively open economies and are happy to let you move "small" amounts of money around. But if you want to move money between the US and China, you will find that it can be a lot harder due to regulations on the Chinese currencies and possibly on the US side as well.
Yea its relatively fine for small amounts of money when you are going to spend it immediately. But when you are sitting on a hoard of cash, you need to decide which currency you want it in, and hope that world economic events doesn't tank the value of YOUR currency before you need to convert it again.
Yes. Happened to me recently. I moved back to the US from another country. Around the time I moved, The money I left in my foreign bank was worth about $10k USD. Within a month or two the exchange rate plummeted, and now It's only worth about $7k. I'm glad I converted most of the other savings to USD before that happened.
Now I'm also stuck hoping that the exchange rate will go back to favorable again.
Individual countries being able to control their own currencies allows them greater control over things like inflation and investment - such as the example gave. Thus, when you convert US dollars to Swedish kronor it's not a 1:1 trade. Depending on the fiscal policies of each country (to enact whatever goal they're trying to achieve), a US dollar might have stronger purchasing power than the kronor, or vice versa.
The UK and a few other EU countries chose to not adopt the euro basically due to these reasons.
You can imagine the economies in Europe as the temperature in different rooms of a badly insulated house. The basement is freezing, the bedroom is to warm, you don’t want to be in the living room without an extra pair of socks and the attic is like a sauna. Monetary policy is the thermostat. With the euro you get one thermostat for the whole house, and the strongest person in the house (Germany) will have the loudest voice on how to set it. If Germany is feeling too cold, then Greece can go and burn. With individual currencies every room gets its own thermostat, but trading items between the rooms gets a little more complicated.
This was a large factor in the economic collapse in Greece in 2009.
You’re right about the pound being a reserve currency, although not a moot one.
The pound isn’t more valuable than the euro. The currencies of stable, developed countries aren’t more or less valuable than others. The different exchange rates correspond to different prices in the different countries. You can compare it to other measurements. A meter is longer than a foot, but the thing I’m measuring is just as long no matter what unit I use to measure it.
On the flip side, many countries (like Poland or Czechia) would have benefited from being in the Eurozone. Their interest rates would have been way lower.
I know there's a hate boner for the UK on Reddit for whatever reason, but come on my guy. No the UK did not opt out because it felt it was special any more than Denmark did.
It literally did.
It opted out of many of the EU rules because "islands are different"
That's why Brexit was such a big deal, IF they ever rejoin the EU they will NEVER get the same deal they got the first time.
They only got that deal because they joined way back when and had special exceptions for themselves
>It opted out of many of the EU rules because "islands are different"
No. It opted out of 4 main things:
Economic and Monetary Union. This is what the Euro fell under. Denmark also opted out of this, and it was purely so both could have domestic control over their own financial policy.
The Schengen Area. This was an opt-out that Ireland also took, because the Common Travel Area was best suited for the Irish/N. Irish border and neither country wanted to interrupt the ongoing peace talks regarding that. This is the only opt out that had anything to do with being an island and because the UK doesn't use citizen ID cards like the rest of Europe does, so passport border checks were more important.
The Charter of Fundamental Human Rights. Note that this wasn't a full opt out, the UK got a clarifying protocal for this because of worries that the charter would infringe on certain parts of UK Labour law.
The last one was to do with Freedom, Justice, and Security which was a whole other can of worms with lots of things the UK opted in and out of. This was something Denmark and Ireland also opted out of.
None of the opt outs were because of the UK feeling "special", there were different reasons for each opt out and multiple other countries also took the same opt outs.
>They only got that deal because they joined way back when and had special exceptions for themselves
This shows you have no idea what you're talking about, because the opt outs were all for things that came into effect much later on, decades after the UK joined the union. Not only that, but plenty of countries had the same opt outs offered.
You spend too much time reading the over simplified "UK bad" posts on Reddit and it shows.
>and bigger and stronger Germany beats up on Greece (again) and gets the policy they want
Are you kidding? We have had interest rates below 1% for a decade because countries like Greece would not be able to afford their debt if there were higher interest rates. ECB policy has essentially been dictated by countries like Greece and Italy out of necessity because them going bankrupt would be so catastrophic.
> But with one currency you can’t have both, and bigger and stronger Germany beats up on Greece (again) and gets the policy they want - to the detriment of the Greek economy.
Someone might read this and get the impression that Greece gets no benefit from its association with Germany and the EU. That's [not completely true](https://www.consilium.europa.eu/en/infographics/financial-assistance-to-greece-2010-2018/).
Being a member of the EU and adopting the Euro are different things. Using a common currency has many benefits of course, or else so many countries wouldn't have adapted it. Trading becomes so much easier and for a country like Greece, it becomes more attractive for tourists to visit.
EU membership does have benefits, but adopting the Euro isn't necessary to being in the EU. Aside from Denmark and (formerly) the UK that negotiated agreements to never join the Eurozone, the other countries don't exactly have a deadline for switching currencies, and there's no legal penalty for sticking with your own money.
Plus you need to satisfy a number of fiscal conditions to even be allowed to join the Eurozone.
Another way of looking at it: with a single global currency and a single base interest rate, the base interest rate affects the global money supply but does not affect the flow of capital between countries. Rather, it is differential rates of economic growth that affect the flow of capital from one country to another. Capital will flow from slower-growing countries to faster-growing ones, seeking greater returns. This means that the price of money will fall in faster-growing countries (ie, the prices of goods and services rise) while the price of money will rise in slower-growing countries (ie, the prices of goods and services fall).
All things being equal, you will tend to end up with inflation in faster-growing countries, and deflation in slower-growing countries. Deflation is of course bad because consumers hoard money and don't spend it, turning a recession into a depression.
If we did, who would control it? And how would that impact counties' abilities to fix their economies?
When currencies' values can fluctuate against others, that allows counties to moderate their economies. In a recession, a weakening currency allows a country's exports to become cheaper and helps their economy recover as other nations buy more from them, increasing employment, flooding money into their economy. Conversely, a strong dollar that's overheating an economy (eg. inflation) can create more supply to tamp down prices because imports become more affordable.
But during the Great Recession, weaker economies in Europe like Greece and Spain had trouble bouncing back because Germany's strong economy propped up the value of the Euro they all use. Greece couldn't dig their way out of recession by exporting cheap olive oil and yogurt in the way they could have if they'd still had their own currency.
Why can't we have just one army for the world, thus ending all war? Answer: because world leaders don't want to give away the things they control. Even the most reasonable leaders will be reluctant: who do they trust with so much power? Who would print money?
It may sound crazy but actually I think the world would benefit greatly if we would somehow be able to form a world government. The world will never come to peace if we continue to think of ourself as "they" and "we". We are one humanity and should act like it, but I know this is wishful thinking and will never happen unless there is some kind of event that forces the whole world to come together
Outright impossible. No one ever came close to it, and even the largest empires got fractured over time, and none were ever in full unity. You'd have to change human nature for that.
It would be really, really hard to have just one currency, with one value, all over the world, because in order for that to exist, everybody would have to agree on what the laws would be regarding who gets to print the money, how much, how often, and so on.
So a global currency would require a global government, which would be really, really hard to create because nobody can agree about the best way to organize a government.
In a way, we kind of do. It's the US dollar right now. A lot of international exchanges occur with it, oil is traded almost exclusively in USD, and it's the benchmark rate for every currency. Even statistics done on costs and standards of living in other countries are always adjusted to US dollars. You can literally go to any country anywhere with US Dollars and find someone willing to accept them for goods and services.
Probably the start of this question is to answer why we need currency in the first place. We need it because you can't have a pure barter society when not everyone needs everything everyone has. In every economy everywhere, a form of currency always evolves for this reason. If a baker needs flour, the person with the flour might not necessarily need baked goods right then. This gets to be very difficult when buying or selling specialized goods and services like surgery at a hospital.
For a currency to work, it has to have certain characteristics. It has to be divisible for small transactions, not easily created, stable (The cost of an item can't change 10% in a week, ergo why crypto hasn't had any real traction as a currency), and universally accepted as valuable. A good way for something to have inherent value is if a government backs it and does all its transactions in that currency. It automatically creates a market and controls the supply. However, gold has functioned as a currency for all known human history and still works today as a currency. The biggest drawback for precious metals is simply that it's not convenient to do electronic transfers of them. You end up having to trade notes backed by supplies of precious metals that may not even exist because you're just trusting entities to have them.
Some of the interesting stories in the past have been where currencies came from. For example, in the Diablo world, people took Stones of Jordan and used them as currency. Game developers never intended that to be the purpose of them, but they were limited in supply, and they became accepted as currency for everything. It wasn't until people found a glitch and flooded the market with them that they died off.
Because it would be both a terrible economic system and also there would be no way to enforce any sort of system without every country ceding monetary control to some authority (well I am sure the crypto folks will disagree).
The variation in currency valuation allows for variations in local conditions. This is not a "nice to have" thing - it is quite essential that a country have some control or else it would be subject to massive fluctuations in purchasing power, employment and domestic investment.
Basically the more productive countries would be forever subsidizing the less productive countries while also causing huge unemployment in the less productive country. This results in political domestic unrest on the part of the productive country and almost certainly political/social chaos in the less productive country. This further causes the less productive country to see capital as well as population flight which makes the situation even worse for them.
We can!
All you need to do is convince every country on the planet to abandon all of their money and use your new World Money instead, and create a central authority responsible for printing and maintaining World Money, and make sure every single country is OK letting that authority control their money supply for them.
Good luck!
Simply because we don't have 1 economic area
FIAT currency is made by the state.. and states can't agree on shit.
But even if we had that.. it would be still bad idea as long as we have different economy. Because own currency is the tool for government to control the economy
Ps: we have 1 currency over the world: bitcoin..
To expand on this - a big part of the 2008 economic crisis was due to the common currency in the Eurozone. Certain economies with large amounts of debt (Greece, Italy) caused significant problems for the valuation of the euro (among many other problems) that affected other economies with fewer currency-related problems.
Thought is stood for Fix It Again, Trichet! A reference to central bank interventions during the 2008 financial crisis and subsequent Euro debt crisis.
That's a backronym. Fiat is a Latin term that means *let it be.* Fiat is essentially a declaration - so in the context of fiat money, it means that the government has declared that the money has value (as opposed to older currency forms like the gold standard, where the money was backed by an asset.)
There's an Italian car manufacturer called FIAT, and that is an acronym, for Fabbrica Italiana Automobili di Torino (Italian Automobile Factory of Turin.) People jokingly say that FIAT stands for "Fix it again, Tony," the same way they joke that Ford stands for "Found on road dead" or "Fix or repair daily"
>Simply because we don't have 1 economic area
Illustrated by "cost of living" in a lot of every day discussion.
Same reason that people can't agree on a federal "minimum wage".
A HIGH federal minimum wage in Metro California would be approaching really good pay in Rural Nebraska.
Now, stretch that over the entire planet where there is even more economic diversity, more extreme poverty, more varied land values, and varying severity of despots for leaders.
You would magnify problems, not lessen them.
Compartmentalization is what keeps most of the world afloat, different economies with different currencies is something of a firewall, though with globalist business dealings and multi-national trade *dependencies*, that's not as true as it once was. That's where aspects of isolationism and independence begins to look more attractive. If X fails miserably, Y isn't drug down into the gutter too.
IF we had one global economy and everything were mandated from on high, if it failed, literally everyone would suffer. That's a large part of why we have geography based nations to begin with.
Another part, is because different cultures want different laws, which is why we have further subdivisions down into states, counties, and cities and even districts and townships.
Maximal agency and independence without breaking down into some anarchistic nightmare.
As much as it sounds nice in theory, having one currency for the whole world would be a logistical nightmare. Different countries hvae different economies, resources, and levels of development. Plus, having a single currency would mean giving up a lot of national sovereignty. It's just not realistic or practical.
The best analogy I can use is this. Imagine a country’s currency as a dish of food. Each country makes their own dish for their own needs and desires. Having the same currency for multiple countries is like having a dinner party with just one type of food. It’s fine if everyone has the same taste but imagine if one person is vegetarian and another is keto and another is lactose intolerant and so on. The more people involved the more difficult it gets. Each country makes economic decisions based of the exchange rates of its currency. Having a low value currency could actually help a nation in a debt crisis by attracting foreign investment due to the good exchange rate. Also there’s the fact that having a single currency means that strong states have to bare the losses of the weak ones. as an American living on the east coast I don’t mind that the value of my currency is affected by something happening in Mississippi. Meanwhile for someone in the Eurozone it’s got to hurt as a Spanish person that your money is tied to the Greek debt crisis
I mean honestly that'd be pretty awesome imagine that just one currency around the world that would be quite the accomplishment nothing would go up or down no rise no drop now imagine if it was ready player one's currency
We can. There are no barriers to that. We don’t even need money. But these are not great options for most countries.
Countries are in competition and want the best for their own people
Giving up the ability to manage and regulate your own currency is a major downgrade for many countries, especially highly developed countries if they get connected to lesser developed countries.
You could. But governments don't want that because they would lose the power to tweek their own money supply / interest rates to suit their own countries' economic conditions (inflation and unemployment rates).
Interesting arguments put by others. It seems then having multiple currencies in the same country (very big countries like India) with say a zone wise restriction will be helpful. It will give central banks more control.
The closest thing we have is cryptocurrency and it is very volatile and there are still debates on how it can be controlled. A currency like the US dollar has a value decided through investments, fiscal policy, and is helpful in times of financial distress.
OH hey little guy! What's that? Why not just one money? Well... you see... all the big places in the world have kings, and all of those kings are really greedy and want to be the only king. Since every king wants to be the only king, none of them can agree on anything and really do good together. That, and if they each have their own money, they get to make rules and stuff so that they can get away with evil stuff. Sometimes they'll control the value of stuff to accomplish a secret goal, like making sure certain other people don't succeed. :/
Because different countries have different economies with different valuations. Like do you want Zimbabwe using the US dollar with their 26% inflation on their new currency after the collapse of their old currency?
Different countries have different economies if everyone used the same currency then weaker economies would diminish its value and people in countries with stronger economies would have less spending power as a result.
This creates a feedback where those stronger economies become weaker as their populace have less money to spend on taxable luxury items.
We saw this with the recent financial crisis in the Eurozone, with hyperinflation in Greece harming the German and French economies.
We can, but before we can do that we need one government and one legal standard and one economic standard and one social standard and one... and folk who've tried to establish that generally aren't looked on too favourably so it never happens.
Because it’s a bad idea.
Monetary policy needs to be flexible based on a countries level of development and industrialization. One size fit all solutions to problems as complicated as global economics never pan out.
It's hard enough getting a single country to just have one currency. There were still regional currencies in the US into the 1900s. Look at how the Euro has been received: lots of people are pissed off that their country's economy is being dragged down by others because of the shared currency system. There isn't a compelling reason to push world currency that isn't overridden by the problems it would create at this point.
We don’t trust each other enough. Someone has to be in charge of making the currency, and if they are making too much or not enough it creates problems for everyone. We don’t trust each other enough to even agree on how much currency creation is “just enough.”
Because the world is divided and to get anything like that passed through into law would take an overwhelming majority vote.
When we live in a world where getting people to agree to *anything* is difficult, imagine getting enough people to agree on this would be a stretch.
A lot of people are “traditional” and have a sense of pride in their currency which outdates the dollar by thousands of years.
A lot of people are also anti-American and would resent any vote to be more “American”
A lot of people are nationalists and don’t believe in a global society system.
It would take a great amount of resources and re-education to change currency. When people are already struggling with the cost of living all around the world; this would seem to be a waste of resources.
I remember when we changed currency in my country decades ago and it took a very long time to adjust. We changed from shillings and pence to the current system and 60 years later my grandparents still never fully got used to it.
You know that joke about old ladies holding up the cashier in a supermarket counting pennies? Yeah it’s because she’s struggling to count the money because it changed. That’s where the joke came from.
Some people aren’t good with change and they never really “adjust”
I haven't seen anyone mention cultural reasons yet. There's a lot of good answers here from a purely economic perspective, but currency also has cultural value. Just like a language, or a style of dress, or a tradition. It's generally better for everyone involved to preserve individual cultures and support people's cultural identities rather than try to create a shallow, false "monoculture," even if it does make transactions more complicated.
A reminder: you can always use gold. Nobody's stopping you. Or bitcoin, etc.
Try paying taxes with it, though.
France doesn't accept US dollars for payment of taxes; and the US doesn't accept Japanese yen in payment of taxes. Taxes are what give money its value. Not some muzzy idea of trust. The gov't has a monopoly on dollars and violence. They sent Capone to Alcatraz for not paying taxes.
So, you can use whatever currency you want, nobody's stopping you. But until there's a planetary tax authority, there won't be a planet-wide currency.
There is a concept in economics known as optimal currency area theory, which states that, for a currency union to work, the area encompassed by it must have certain characteristics, among them:
1. Mobility of labor, ie people in the economy are allowed to move to where they and their skills are in demand
2. Mobility of capital along with flexible prices and wages, ie capital (read: money, usually to buy things like physical plant such as buildings, machines, etc) is able to move relatively freely and wages and prices are allowed to fluctuate so that the forces of supply and demand are allowed to balance
3. Mechanisms for risk sharing, most often in the form of money transfers from more prosperous regions to less prosperous regions
4. Similarity of business cycles, ie everywhere in the currency union experiences booms and busts at roughly the same time and to roughly the same degree.
Beyond this, the value of currency is something governments can alter in order to make their goods more competitive on the international market for export in times where the country is not doing well economically as a means of spurring both employment and growth. This is a strategy perhaps most notably employed by China for much of the last couple decades wherein the value of the Yuan was seemingly intentionally kept below its true value compared to the dollar in order to drive export-lead growth in the economy (yes this is essentially why seemingly everything for a while was “made in China”). However, in the last few years the demographic aftereffects of the one-child policy have come home to roost in China, wherein the population is aging and does not appear capable of driving further economic growth via consumption. In general people consume a lot on average when they are between ages 20 and 50 (buying houses and cars, raising kids, taking vacations, etc) but not so much as they approach retirement age, and even less so once they are retired.
This also explains why the hype over BRICS and specifically the notion of a unified BRICS currency is nothing short of laughable; beyond the more immediate problem that two of the countries (China and India) are actively feuding with each other at the moment, combined with the geographic problems imposed by such an alliance (South Africa and Brazil would need to get lopped off to make this even remotely workable), if one looks at a graph of the combined output of these economies it’s basically almost all China by a huge margin (like the other four countries are maybe 25% of the total and the rest is China) not to mention China accounts for almost all of the growth, so this operation in whatever form it would take would almost automatically be lead by China and it’s questionable whether such is palatable by the other countries involved.
Because different currencies have different origins, but the reason we can't consolidate/ unify the concept of "value" is that capitalism depends on some markets being stronger than others.
A global currency would lack a central regulatory authority and a bank and it would be subject to no central one fiscal policy. It’s not feasible with the amount of division in this world. Humans have a long way to go.
We can have one currency, but unless it's naturally occurring currency (like gold) then we have to decide who gets to "print" it. That tends to be a reserved sovereign right.
Some countries have decided to use a foreign currency (or gold) instead of having their own. But, they can't have a "real" central bank that loans the government money at government-determined interest rates. Thats what "central bank rate" means. The interest the government has decided to pay on its loans. You need to control the currency to do this.
The Eurozone is an experiment in "common currency," so it is possible. It just requires everyone to also share a central bank, the ECB.
Different jurisdictions have different rules on trade, they also have different demands, different geography, and different demographics. This means there is a difference in how that economy functions. Having a floating currency between two different areas means the differences created can be equalised by the difference in the value of the currency.
For example pre euro if Germany sells audis to Greece and Greece sells olive oil to Germany. Money is flowing from Greece to Germany in aggregate. What then happens is the value of the Greek peso falls and the deutchmark rises. So now each olive oil sale gives relatively the Greeks more pesos and each auid gives fewer benchmarks in aggregate for the same sale as each is converting to their own currency. This means it's cheaper to Germans to buy Greek stuff, so they can buy more of it eror reducibg the trade deficit. It also means investment into Greece is cheaper, interest rates must rise in greece , it also means that deuchmarks provide less interest (yield), people cannot afford as many things priced in deatchmarks, and it also means inflation in Germany rises as the demand for currency is higher. Over time this also means the trad deficit shrinks until equalised......the difference is all In both economies is expressed in the exchange rate.
In the current euro system that doesnt happen, so to equalise which is what the greek debt crisis was ultimately about. It ultimately means that instead of standards of living staying the same, but currency changed value. The euro currency stayed the same, so to equalise the trade deficit standards of living in Greece had to fall so that labour costs equalised the issue by lowering costs of production. You can argue if that is morally good or not. My view is it's inherently bad to have such disparate economies linked as a one-size-fits policy,as it is not stable.
As you can see currency exchange is a way to manage your economy to your spevific needs, you base rate, your tarrif policy, your government spending policy, your trade rules policy. Without that a government is severely limited in its way of handling fluctuations in economics between it and other countries.
Getting the entire world to agree on anything would be impossible, never mind something that would require an overhaul of every single currency. It would also decrease stability of the chosen currency, because everybody can make the currency
Great answers already, so here's a bit different of a take:
He who controls the printing press (for the money) controls the entire economy.
So if everyone used a single currency (let's use Dollars because I'm a self-centered American):
1) Maybe we let USA keep producing it, and they just make enough for the whole world. Well, now the USA can directly control the rate of inflation for the entire world by printing more/less money. If the USA is having an economic crisis, they can react to it with monetary policy. But if anyone else is having a crisis, they have to ASK the USA to react to it.
2) Maybe we let everyone print money, since they're all using it. Now any country could just print money to pay their debts, driving rampant global inflation until the entire currency falls apart. Can't do that.
3) Okay, so we establish a 3rd party, a completely country-neutral entity. Like putting the Money Factory in Antarctica, maintained and regulated by a mixed group from the largest countries in the world (economically). But this basically just takes us back to option #1, just with added layers of bureaucracy and diplomacy that'd probably mean NOBODY ever makes any changes to how/when money is printed.
4) Or maybe we just stop printing money entirely, except when it gets properly disposed of (the entity in charge of printing destroys 1 old dollar, and prints exactly 1 new dollar to match it). Now there's no dials or levers to control on the money supply, and deflation occurs rapidly as the GDP continue to grow without any increase in the availability of money. And we send the whole world into a cash grab tailspin of hogging physical money in order to profit off of the deflation.
**TLDR:**
**No country would be willing to surrender the sovereignity of printing & regulating their own currency. Just look at how difficult it has been for the EU and the Euro, and imagine trying to get the USA, Russia, China, North Korea, Iran, the UK, and Somalia to ALL agree on any global currency policy together.**
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Always seems to make more sense to me if we’d cut currency exchanges out of trade. Form a company in the US. Buy US products with US dollars. Trade to Japan, and get yen in Japan. Take that Yen, buy Japanese products and trade to US for US dollars in the US. Repeat cycle.
Near as I can figure, there wouldn’t even be trade imbalances or deficits.
Right away, after we decide on who gets to be in charge of printing that money.
For a country to use a currency some other country is printing is a really unpleasant proposition. Some countries do it, but it's sort of a last resort. Basically the entire country will end up paying inflation tax out of the country, rather than keeping that value within the borders.
Currency is worth whatever backs its value. Many currencies have been based on gold or silver standards, meaning each unit of currency is worth an equivalent value of gold or silver. This strictly requires a unit of goods exists for each unit of currency. If all currency was set up this way, it would be possible for a universal currency.
Many modern currencies are *fiat currency*. These have value only because the government that guarantees them backs them against its economy. There is nothing tangible that such a currency is worth a standard amount of. If the economy tanks, so does the value of fiat currency.
As a result, a government can physically print as much fiat currency as they want, but doing so makes each unit of currency worth less as supply goes up (i.e. inflation). With a single universal currency, a country could start printing lots of cash, giving them a lot more cash on hand at the expense of everyone else using it.
A single world currency is possible with very strict controls over the backing, printing, and circulation of currency. This would require each involved economy to be on similarly solid ground. You could read up on the Euro and member states of the EU to find examples of the difficulties involved in a shared currency.
As long as currency is tied to entities with politics there will always be conflicting interests, influencing the perception of the value.
A true one world currency would be a decentralized non political measure of value based on universal trust.
Forget backing it with gold or clean water as collateral because whoever controls the underlying assets controls the currency.
Even digital currency has its limitations due to lack of accessibility and digital attack vectors.
I know plenty of shit and I know a get-rich-quick scam when I see one. I think bitcoin as it was originally envisioned had potential to be something beyond that but not enough people are willing to use it that way for it to work.
We mostly do, it’s called the US Dollar, it’s used in trade all over the world. However it’s starting to lose some ground, it’ll be interesting to see how that pans out.
Technically possible, but countries generally want a level of control over their monetary policy and currency value that would disallow. For some "control" means direct manipulation but for others they just dont want to inherit problems from other countries' economies.
Wasn’t half the Eurozone’s problems 10 years ago was that interest rates were too low for some countries and too high for others.
[удалено]
Except the US has WAY more fiscal transfers to help compensate for that than the EU has.
Yes but the US has a centralized federal fiscal policy that redistributes money from high productivity (rich) states to low productivity (poor) states.
Also it takes a lot of effort to have the Eurozone “work”. You would need world peace for it to work gloy
In a sense yes, but it was correlated to borrowing behaviors. You could say the opposite is the case now. But what is definitely the case is that economies on the Euro (see: Baltics) are less dynamic than countries on their own currency (Poland / Czech Republic) overall. With exceptions like Hungary and Turkey showing what bad management looks like if you want to try that.
If there was only one currency, couldn’t everyone just start printing money?
No, for the one currency to work, you’d need some centralized power that controls the currency. That’s exactly why it won’t work, at least not for a very long time.
Or a decentralised organisation with implicit controls
Depends on what controls you have on it. You'd need some kind of global financial authority which...yeah any country doing well probably isn't going to want to submit to. It causes enough friction just with the euro.
Unless you base it on some resource requiring proof of work, but that's just reinventing the gold standard.
Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969. It operates as a supplement to the existing money reserves of member countries. https://www.imf.org/en/Topics/special-drawing-right
CO2e Emission Certificates traded over the Emission Trading System worldwide: generated when 1 ton of CO2equivalents is removed or prevented from entering the atmosphere. 1 CO2eq cerificate is worth about 60€
Ok now explain like I’m 3
This is....beyond my ability to tldr more than I did above. So here's a longer version. The value of money is based on the belief that it's worth something. That's it. If you have the kind of money accepted in a big, stable country like....for example the US where I'm from, then you can be very sure that you can always get all kinds of different things for your money. Further, you can be pretty confident that what a certain amount of that kind of money gets you doesn't change all that fast. And yes, we had an inflation spike but that's after decades of very low inflation and the US got hit less than most. On the other hand if you have money that is accepted in a volatile or limited economy, like say Haitian Gourdes right now, then you can't be sure exactly what you can buy with it and how much it will cost you. Countries want to have their money be stable and reliable. They want people to want their money. It provides advantages when trading with it and it also encourages investors to buy their government bonds because they can be confident want those bonds will be worth and what they can get with them when they pay out. Even more, if other countries, either their populations or their actual government, acquire a bunch of your money or bonds or other things that pay out in your money then those countries now benefit when you are doing well. Thay encourages good trade deals, avoiding diplomatic and especially military conflict, all sorts of things. Countries CAN affect what happens to their money and economies. They can play with interest rates to affect the rate at which people take on debt, which can raise or lower inflation because it affects how much liquid funds people can spend on the same things that are our there. They can take action to affect employment, trade, all sorts of little factors that add in to it. They like having that control. Authoritarian regimes that don't mind messing with markets like China can directly mandate things like prices. If you have everyone on the same currency, all those controls go away. Currency in the US, Australia, Japan, etc... all become subject to the economic happenings in Venezuela, Haiti, Zambia, Russia, Turkey, wherever. They DO NOT want the problems those countries have. They don't want to lose out on the soft power financial advantages of being a stable currency. They don't want to lose control over their currency. Now, of course, this would also be a boon to countries that currently have volatile currencies. They would get to ride the wake of those larger economies a bit. This tradeoff has happened within the EU and it's extended trade union several times. But...if you wanted to install a world currency who is more important to have backing your idea: the EU and the US who would take a hit from it or Venezuela and Zambia who would benefit?
Everybody trades the same cookies.
Wait: I thought of an actual explain to a child. You know how people would like...trade things from their lunches? If mom sends you with a snickers bat or the good cookies every day a lot of people will want it and you can either keep it or trade it for basically whatever you want. Even if you have a nut allergy and arent going to use it yourself just having it to trade gives you lots of options. Some other kid whose mom gives him licorice every day, he doesn't have those options. He might be able to trade with like one person or maybe have to give over his whole lunch for one snickers bar. If the school suddenly said "okay, no sending desserts to school, we will provide everyone with a plain Hershey bar" then you, as snicket bar kid, both took a downgrade and lost all your trade options. Licorice kid is probably stoked, though. Places like the EU and the US have cookies and snickers. Places like Haiti have licorice.
Probably not 3 but I’ll try my best: Your teacher gives stickers to you and your classmates when you behave. You can give the stickers back to your teacher in return for certain benefits, but mostly you will trade them with classmates for small favors or items like chocolate milk. Your teacher has some control over what items are worth as she can give more stickers, or she can make it more interesting to give them back to her. Now imagine another classroom uses the same stickers, but the teacher’s kid is also in that class. She could give him extra stickers that he can trade for some items from your class. Suddenly your stickers are worth less because there are more stickers in your classroom now, but you didn’t get more. Or imagine another classroom that uses the same stickers. They have a huge shortage of chocolate milk so they start buying your classes chocolate milk, but there’s not enough for both classes so now it’s more expensive and you get less chocolate milk with the stickers you get. If they had different stickers, your classroom could tell the other classrooms that they need more stickers to buy chocolate milk, because you can’t do much with their stickers, and your classes chocolate milk wouldn’t become much more expensive for you.
# ༼ つ ◕_◕ ༽つPRAISE BOX༼ つ ◕_◕ ༽つ
*conspiracy theories intensify*
Huh? Some places engage in very direct currency manipulation. It's well documented fact. The ones that don't are still trying to influence it indirectly with things like government spending and interest rates.
We have a world currency. It's called Cryptocurrency. Bitcoin is the most famous example, but there are hundreds of them.
> We have a world currency.... there are hundreds of them. Lol
By the same logic, potatoes are also world currency. Some people accept it as tender, some don't; same with bitcoin. I think more would accept potatoes than bitcoin though. Not against bitcoin, i do own some myself.
I bet more people use potatoes for currency than Bitcoin
Bitcoin doesn't work very well when the main mechanism for transferring it is constantly being subverted because it's too slow, inefficient, and expensive.
By this logic, _all_ currency is world currency. Cryptobros really don't have any clue wtf they're talking about. edit: lmao this dude fuckin blocked me. It's okay. reddit blocks are a form of world currency.
Except virtually no one uses crypto*currency* as a currency. They hold it as a speculative investment expecting that their hoard of virtual coins will be worth more in the future. If you know anything about economics, that's a terrible "feature" for a currency. Ideally a currency should depreciate by about 2% per year, aka inflation. This forces you to put your money to use by investing it into growing the economy. If everybody hoards their money because it will be worth more in the future the economy grinds to a halt, which is what happened to Japan over what's now referred to as the "Lost Decades" of the 90s, 00s and 10s.
This is delusional to anyone who isn't spending most of their time in a cryptocurrency echo chamber.
Fine to say, but let's be honest they're mostly speculative investments for now. it's just one more of many each individual person can choose to accept or value as the like. OPs talking about a single world currency everyone would use. National banking all the way down to transactions between individuals. When treasury bonds in major economies pay out in bitcoin then we can talk about if it meets what OPs on about.
And look at how volatile it is.
That’s the same as every other currency. You can have US$ almost everywhere as well, change it to your local currency and pay with it where it is accepted. The question was why there isn’t *only* one currency and your answer included "hundreds".
Crypto isn't a currency in the same way as dollars and euros, despite whatever semantic bs people like to say about the "arbitrary" value of government regulated money. I can also barter with anyone in the world, that doesn't mean my chickens are a world currency.
Look at the Euro for the problem. Germany is an advanced manufacturing economy that wants a low, stable inflation and interest rate because they carry relatively low debt and want to keep interest rates down for their domestic consumers. Greece is a more… *fiesty* economy that would do best with higher rates of inflation to help devalue their existing debt and drive more aggressive investment. But with one currency you can’t have both, and bigger and stronger Germany beats up on Greece (again) and gets the policy they want - to the detriment of the Greek economy. A country that has its own currency can set its own fiscal policy to whatever is best. Usually this is helpful in times of financial problems, but sometimes it gets mismanaged and causes an even more severe crisis. Venezuela would have been better off *not* having control of their currency.
I wrote more but then realized you already covered most of what I said and in greater detail, so I’ll just summarize pointlessly: United States: Fiscal & Monetary Union, allowing it to somewhat deal with differences is rich and poor areas EU: Monetary but not fiscal Union, leading to issues like Greece One world currency would have all the issues of the EU, but on an even greater scale.
Even within the United States a single currency causes problems. Mississippi has entrenched poverty and would benefit from a weaker currency and greater foreign investment. New York has ballooning housing costs and a large financial sector it needs tighter monetary policy and less foreign investment.
Yes but the states do at least have mechanisms for transferring g some of the wealth from new York to missippi. It can do this with federal level benefits, investment and personal location. It also has easy ways (assuming political will) to create programs to directly create wealth and investment in those areas. The eu doesn't have this power, at least to the extent the us does, it's a far loser union. Whilst it does have some programs for subsidies and locating investments these tend to not allow specifc advantages to one country over another (i.e farming subsidies) or tend to focus on areas with existing skills, such as its science programs where the vast majority goes to france and Germany (with the uk being the largest receipent of jobs pre brexit). Which are already among the richest countries in the eu. The euro crisis could of been a lot less worse for greece had the germans just bailed them out and invested heavily in them. Like Germany did to it's eastern regions. But the eu lacks that fiscal union so Germany would have to want to help Greece. And it didnt.
You have similar issues in Zimbabwe and Panama which don't have their own currency and have a limited supply of USD. They have no control over monetary policy of the US and this USD.
The difference is the USD is very stable compared to other currencies so it won't have runaway inflation and in addition having a large surplus of hard currency internationally accepted is a major advantage and one of the main reasons they use it. Basically they trade internal control for stability. Which is also why the USD is the backup currency for countries with massive inflation problems, currently Russia, Venezuela, and Argentina all use USD as an unofficial secondary backup currency.
I’m very interested in how “remote work” impacts this. There’s lots of discontent in places like Idaho over tech-workers moving in during the pandemic and driving up house prices, but doesn’t such movement also add money to the local economy and relieve high prices in places like San Francisco? Surely that moves the needle on things like the New York/Mississippi problem of wealth and housing imbalance?
People in Idaho don’t give a shit about house prices in San Francisco. They do care about rich remote workers moving in and inflating their property prices
Just adding to this: people will be affected differently. The people feeling the negative effects of sudden property appreciation will be renters or people looking to significantly upsize the home the own. Someone who just bought a big house on mortgage right before property values suddenly appreciated would get a big windfall, at least on paper.
That is only on paper and being as all other property has appreciated with your own, it’s worthless
Point taken, up to a point. But: A) if it isn't their primary residence they can sell it and pocket the difference. B1) if it is their primary residence, they can sell it and move somewhere with cheaper housing, and pocket the difference B2) if it is their primary home they can sell it and downsize in the same market, pocketing the difference (think empty nesters or retirees) B3) if it is their primary residence, they still have the new equity, and they can use their new paper wealth as collateral for a bigger/more favorable home equity loan. B4) even if none of B1-3 applies, they are no worse off (except to the degree that property or if applicable estate taxes go up, or to the degree they are no longer eligible for financial aid because they are wealthy on paper)
For most regular homeowners, item B4 is all that applies. Property tax goes up. Most people don't want to minmax location, house size, etc., they just want a place to live.
> being as all other property has appreciated with your own, it’s worthless If this was true, remote workers wouldn't have moved to Idaho; the values of the homes in Idaho would have already gone up in value becaues the values in San Francisco went up. If you're willing to move to a lower cost of living area/area with lower property values, it's very valuable. I have a friend that had his home appreciate significantly. He sold for a profit and rolled the equity into a home in a lower cost of living area, where his new home (again) appreciated significantly. He sold that home and moved again to a lower cost of living area and now has no mortgage for the more house and land. This was over an 8 year span.
Yeah, long term it's definitely beneficial, but you can also see similar dynamics in [Portugal](https://www.euronews.com/travel/2023/05/12/proto-gentrifies-are-digital-nomads-ruining-portugal), where people with jobs that are technically abroad can afford things people with local jobs can't.
> New York has ballooning housing costs and a large financial sector it needs tighter monetary policy and less foreign investment. I'm not sure those two policy suggestions are the fix, the large financial sector is simply NYC's main economic output so it doesn't really need *fixed* (it's the main financial hub of the entire American economy, and to a good extent the global economy), and the ballooning housing costs are resolved by building more housing, which requires some kind of investment.
I'd never thought about this. Good to learn something today
Adding to this, you have another problem. * United States: Cultural union with one shared language. * EU: Much more diverse cultures with a bazillion different languages. By way of illustration: Athens to Stockholm is more or less the same distance as Miami to Minneapolis. Along that straight line alone, and ignoring the non-EU countries along the way, you'll find three different scripts (greek, cyrillic, and latin), you'll find six Indo-European languages (Greek, Bulgarian, Romanian, Slovak, Polish, and Swedish), and you'll find a completely unrelated Uralic language (Hungarian). If you head from Athens to Brussels instead, equivalent to Miami to Kansas City, you'll find six more languages (Croatian, Slovene, Italian, German, French, Dutch). This means that immigration within the EU is easy from a legal standpoint, but is much harder in practice than immigration within the US.
Those are also only the major nationally recognised languages, not counting anything regional or on the dialect/language border (bavarian, romansch, or Luxembourgish for example)
Your comment is lacking a vital bit of history. The Greeks cooked their books and faked numbers so they could become a member of the Eurozone. They would not have been able to adopt the Euro if they had applied with their real economic data. This is something that’s been openly admitted by the Greek government btw: https://www.nytimes.com/2004/09/23/world/europe/greece-admits-faking-data-to-join-europe.html https://www.bbc.com/news/world-europe-16834815
Has there ever been discussion about or calls for removing a country from the eurozone? Has that ever happened?
There have been serious discussions about kicking Greece out after they threatened to default on their debt (which would have messed with the value of the Eurozone. Check this wiki article, and read the section about Grexit: https://en.m.wikipedia.org/wiki/Greek_government-debt_crisis
And everyone knew that happened before they came in and didn't care. Because the Euro was a political project first with the economics as an afterthought until the recession happened.
This is revisionism. Greece caught a lot of flak for what they did.
So, in your opinion, the only way a world currency would exist is if a one world government existed first?
Not the same person, but that's not necessarily it. Even with a single global government, there would still be reasons to manage different areas/situations with different policies. But if there was a single global currency, the governing body wouldn't be able to do much to avoid the main problem.
IIRC, currency conversions also act as a buffer for economic disruption. One region can tank without taking the rest of the planet with it.
Not really. It's more that a world currency could cause a lot of problems unless the world was relatively economically equal. (That's not to say it wouldn't have benefits! It definitely would have significant benefits).
Seems like things getting a lot more equitable, at least from my anecdotal point of view. Seems like we’re headed toward a one world government. What are you thoughts on that?
Things are definitely getting more equal, but it might take a long time for things to get equal-enough for that.
I agree. I mean, who can predict what the future will hold. I’m hoping AI won’t take us in the opposite direction but right now that doesn’t seem promising…
basically yes, financial policy is a huge method of control, and can even be used as a weapon. you have to have some central body in charge of it all, and whoever that was would have an unbelievable amount of power.
This is a fairly negative take though. It's not i correct by any means but is only one side of the story. Greece as a country would have defaulted on their economic position if not for being able to piggyback of the larger stability of the Euro compared to what a Greek currency would be able to do on its own in order to pull yourself out. A debt crisis like what occured in Greece is a consequence when the positive aspect you mentioned (riskier investments) fail to generate the economic growth you envision it would. That only leads to more debt. There are other ways to get guarantees from other countries (for example the US could say that they guarantee Greek loans, meaning the US will pay the loans back to lenders if Greece fails to pay) but being part of the Eurozone means you are automatically guaranteed this process occurs as others are tied to you just as much as you are to them.
This also breaks down intra country. Here in Canada, provinces like Ontario could use lower rates now that our inflation is easing. But Alberta needs higher rates due to higher inflation.
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If you traded out all your US dollars for Swedish Kronor, you’ll have a hard time doing any business in the US. The government and financial institutions are only interested in their own currency. Private businesses will sometimes accept foreign currency in countries where it comes up a lot and the exchange rates are favorable. You’d have a real hard time finding anyone willing to accept foreign currency in the US.
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you may not know the difference as a private citizen who buys parsley in a convenience store, but when global scale money enters the picture - national reserves, large scale projects etc. any currency is just a commodity and some commodities are too volatile to be acceptable USA exerts much of it's power because of the status of US dollar as the world's reserve currency
The exchange rate between those currencies change very often This week you might get 1.25 kronor per 1 dollar Next week it might be 1.18 kronor per 1 dollar This variance is caused by the differing economic situations in those countries at those moments
As an individual investor, for USD and SEK, the only practical barrier is exchange fees. The US and Sweden have relatively open economies and are happy to let you move "small" amounts of money around. But if you want to move money between the US and China, you will find that it can be a lot harder due to regulations on the Chinese currencies and possibly on the US side as well.
Yea its relatively fine for small amounts of money when you are going to spend it immediately. But when you are sitting on a hoard of cash, you need to decide which currency you want it in, and hope that world economic events doesn't tank the value of YOUR currency before you need to convert it again.
Yes. Happened to me recently. I moved back to the US from another country. Around the time I moved, The money I left in my foreign bank was worth about $10k USD. Within a month or two the exchange rate plummeted, and now It's only worth about $7k. I'm glad I converted most of the other savings to USD before that happened. Now I'm also stuck hoping that the exchange rate will go back to favorable again.
Individual countries being able to control their own currencies allows them greater control over things like inflation and investment - such as the example gave. Thus, when you convert US dollars to Swedish kronor it's not a 1:1 trade. Depending on the fiscal policies of each country (to enact whatever goal they're trying to achieve), a US dollar might have stronger purchasing power than the kronor, or vice versa.
Erdogan's government shouldn't be allowed within 100 miles of a central bank.
Is this part of why Britain uses the pound?
The UK and a few other EU countries chose to not adopt the euro basically due to these reasons. You can imagine the economies in Europe as the temperature in different rooms of a badly insulated house. The basement is freezing, the bedroom is to warm, you don’t want to be in the living room without an extra pair of socks and the attic is like a sauna. Monetary policy is the thermostat. With the euro you get one thermostat for the whole house, and the strongest person in the house (Germany) will have the loudest voice on how to set it. If Germany is feeling too cold, then Greece can go and burn. With individual currencies every room gets its own thermostat, but trading items between the rooms gets a little more complicated. This was a large factor in the economic collapse in Greece in 2009.
One other reason that the UK didn’t is that the pound was already a reserve currency and more valuable than the Euro, so there was no reason to do so.
You’re right about the pound being a reserve currency, although not a moot one. The pound isn’t more valuable than the euro. The currencies of stable, developed countries aren’t more or less valuable than others. The different exchange rates correspond to different prices in the different countries. You can compare it to other measurements. A meter is longer than a foot, but the thing I’m measuring is just as long no matter what unit I use to measure it.
On the flip side, many countries (like Poland or Czechia) would have benefited from being in the Eurozone. Their interest rates would have been way lower.
Low interest rate aren't a universally a good phenomenon, and being able to manipulate them is one of the benefits of having a national currency.
Low interest rates was a cause of Greece’s problems. Interest rates need to be adjusted according to the financial situation in the country.
In the UK's case it is more hubris and because they think they are special
I know there's a hate boner for the UK on Reddit for whatever reason, but come on my guy. No the UK did not opt out because it felt it was special any more than Denmark did.
It literally did. It opted out of many of the EU rules because "islands are different" That's why Brexit was such a big deal, IF they ever rejoin the EU they will NEVER get the same deal they got the first time. They only got that deal because they joined way back when and had special exceptions for themselves
>It opted out of many of the EU rules because "islands are different" No. It opted out of 4 main things: Economic and Monetary Union. This is what the Euro fell under. Denmark also opted out of this, and it was purely so both could have domestic control over their own financial policy. The Schengen Area. This was an opt-out that Ireland also took, because the Common Travel Area was best suited for the Irish/N. Irish border and neither country wanted to interrupt the ongoing peace talks regarding that. This is the only opt out that had anything to do with being an island and because the UK doesn't use citizen ID cards like the rest of Europe does, so passport border checks were more important. The Charter of Fundamental Human Rights. Note that this wasn't a full opt out, the UK got a clarifying protocal for this because of worries that the charter would infringe on certain parts of UK Labour law. The last one was to do with Freedom, Justice, and Security which was a whole other can of worms with lots of things the UK opted in and out of. This was something Denmark and Ireland also opted out of. None of the opt outs were because of the UK feeling "special", there were different reasons for each opt out and multiple other countries also took the same opt outs. >They only got that deal because they joined way back when and had special exceptions for themselves This shows you have no idea what you're talking about, because the opt outs were all for things that came into effect much later on, decades after the UK joined the union. Not only that, but plenty of countries had the same opt outs offered. You spend too much time reading the over simplified "UK bad" posts on Reddit and it shows.
Another example - Ecuador moved to the US dollar and has been a good choice for them due to the stability, vs. their old currency.
Adding to this answer, this concept is called "[Optimum currency area](https://en.wikipedia.org/wiki/Optimum_currency_area)".
Thought I understood fiscal/monetary policy but learned a lot from this rather simple comment, thanks!
Great explanation. Can you expand on what the motivator for Greece to use the Euro is then?
>and bigger and stronger Germany beats up on Greece (again) and gets the policy they want Are you kidding? We have had interest rates below 1% for a decade because countries like Greece would not be able to afford their debt if there were higher interest rates. ECB policy has essentially been dictated by countries like Greece and Italy out of necessity because them going bankrupt would be so catastrophic.
> But with one currency you can’t have both, and bigger and stronger Germany beats up on Greece (again) and gets the policy they want - to the detriment of the Greek economy. Someone might read this and get the impression that Greece gets no benefit from its association with Germany and the EU. That's [not completely true](https://www.consilium.europa.eu/en/infographics/financial-assistance-to-greece-2010-2018/).
Doesn’t EU membership benefits offset some of the problems of having one currency?
Being a member of the EU and adopting the Euro are different things. Using a common currency has many benefits of course, or else so many countries wouldn't have adapted it. Trading becomes so much easier and for a country like Greece, it becomes more attractive for tourists to visit.
EU membership does have benefits, but adopting the Euro isn't necessary to being in the EU. Aside from Denmark and (formerly) the UK that negotiated agreements to never join the Eurozone, the other countries don't exactly have a deadline for switching currencies, and there's no legal penalty for sticking with your own money. Plus you need to satisfy a number of fiscal conditions to even be allowed to join the Eurozone.
Another way of looking at it: with a single global currency and a single base interest rate, the base interest rate affects the global money supply but does not affect the flow of capital between countries. Rather, it is differential rates of economic growth that affect the flow of capital from one country to another. Capital will flow from slower-growing countries to faster-growing ones, seeking greater returns. This means that the price of money will fall in faster-growing countries (ie, the prices of goods and services rise) while the price of money will rise in slower-growing countries (ie, the prices of goods and services fall). All things being equal, you will tend to end up with inflation in faster-growing countries, and deflation in slower-growing countries. Deflation is of course bad because consumers hoard money and don't spend it, turning a recession into a depression.
To be fair the euro was modelled after the Deutsche Mark from the very start. That was absolutely known and came with a bunch of benefits
If we did, who would control it? And how would that impact counties' abilities to fix their economies? When currencies' values can fluctuate against others, that allows counties to moderate their economies. In a recession, a weakening currency allows a country's exports to become cheaper and helps their economy recover as other nations buy more from them, increasing employment, flooding money into their economy. Conversely, a strong dollar that's overheating an economy (eg. inflation) can create more supply to tamp down prices because imports become more affordable. But during the Great Recession, weaker economies in Europe like Greece and Spain had trouble bouncing back because Germany's strong economy propped up the value of the Euro they all use. Greece couldn't dig their way out of recession by exporting cheap olive oil and yogurt in the way they could have if they'd still had their own currency.
Wouldn’t an American currency be the best though, since America has the best economic and diplomatic policies?
Citation needed... America has a shockingly high amount of poverty, much more so than most other developed countries.
Look at American allies and look at American adversaries
Why can't we have just one army for the world, thus ending all war? Answer: because world leaders don't want to give away the things they control. Even the most reasonable leaders will be reluctant: who do they trust with so much power? Who would print money?
It may sound crazy but actually I think the world would benefit greatly if we would somehow be able to form a world government. The world will never come to peace if we continue to think of ourself as "they" and "we". We are one humanity and should act like it, but I know this is wishful thinking and will never happen unless there is some kind of event that forces the whole world to come together
Outright impossible. No one ever came close to it, and even the largest empires got fractured over time, and none were ever in full unity. You'd have to change human nature for that.
Same reason we don't have one country in the world, people disagree with each other on how things should be run.
It would be really, really hard to have just one currency, with one value, all over the world, because in order for that to exist, everybody would have to agree on what the laws would be regarding who gets to print the money, how much, how often, and so on. So a global currency would require a global government, which would be really, really hard to create because nobody can agree about the best way to organize a government.
In a way, we kind of do. It's the US dollar right now. A lot of international exchanges occur with it, oil is traded almost exclusively in USD, and it's the benchmark rate for every currency. Even statistics done on costs and standards of living in other countries are always adjusted to US dollars. You can literally go to any country anywhere with US Dollars and find someone willing to accept them for goods and services. Probably the start of this question is to answer why we need currency in the first place. We need it because you can't have a pure barter society when not everyone needs everything everyone has. In every economy everywhere, a form of currency always evolves for this reason. If a baker needs flour, the person with the flour might not necessarily need baked goods right then. This gets to be very difficult when buying or selling specialized goods and services like surgery at a hospital. For a currency to work, it has to have certain characteristics. It has to be divisible for small transactions, not easily created, stable (The cost of an item can't change 10% in a week, ergo why crypto hasn't had any real traction as a currency), and universally accepted as valuable. A good way for something to have inherent value is if a government backs it and does all its transactions in that currency. It automatically creates a market and controls the supply. However, gold has functioned as a currency for all known human history and still works today as a currency. The biggest drawback for precious metals is simply that it's not convenient to do electronic transfers of them. You end up having to trade notes backed by supplies of precious metals that may not even exist because you're just trusting entities to have them. Some of the interesting stories in the past have been where currencies came from. For example, in the Diablo world, people took Stones of Jordan and used them as currency. Game developers never intended that to be the purpose of them, but they were limited in supply, and they became accepted as currency for everything. It wasn't until people found a glitch and flooded the market with them that they died off.
Because it would be both a terrible economic system and also there would be no way to enforce any sort of system without every country ceding monetary control to some authority (well I am sure the crypto folks will disagree). The variation in currency valuation allows for variations in local conditions. This is not a "nice to have" thing - it is quite essential that a country have some control or else it would be subject to massive fluctuations in purchasing power, employment and domestic investment. Basically the more productive countries would be forever subsidizing the less productive countries while also causing huge unemployment in the less productive country. This results in political domestic unrest on the part of the productive country and almost certainly political/social chaos in the less productive country. This further causes the less productive country to see capital as well as population flight which makes the situation even worse for them.
We can! All you need to do is convince every country on the planet to abandon all of their money and use your new World Money instead, and create a central authority responsible for printing and maintaining World Money, and make sure every single country is OK letting that authority control their money supply for them. Good luck!
Simply because we don't have 1 economic area FIAT currency is made by the state.. and states can't agree on shit. But even if we had that.. it would be still bad idea as long as we have different economy. Because own currency is the tool for government to control the economy Ps: we have 1 currency over the world: bitcoin..
To expand on this - a big part of the 2008 economic crisis was due to the common currency in the Eurozone. Certain economies with large amounts of debt (Greece, Italy) caused significant problems for the valuation of the euro (among many other problems) that affected other economies with fewer currency-related problems.
I don’t know if you capitalized *fiat* for emphasis but, in case not, fiat in the context of currency is not an acronym or initialism.
Thought is stood for Fix It Again, Trichet! A reference to central bank interventions during the 2008 financial crisis and subsequent Euro debt crisis.
That's a backronym. Fiat is a Latin term that means *let it be.* Fiat is essentially a declaration - so in the context of fiat money, it means that the government has declared that the money has value (as opposed to older currency forms like the gold standard, where the money was backed by an asset.) There's an Italian car manufacturer called FIAT, and that is an acronym, for Fabbrica Italiana Automobili di Torino (Italian Automobile Factory of Turin.) People jokingly say that FIAT stands for "Fix it again, Tony," the same way they joke that Ford stands for "Found on road dead" or "Fix or repair daily"
r/thatsthejoke
>Simply because we don't have 1 economic area Illustrated by "cost of living" in a lot of every day discussion. Same reason that people can't agree on a federal "minimum wage". A HIGH federal minimum wage in Metro California would be approaching really good pay in Rural Nebraska. Now, stretch that over the entire planet where there is even more economic diversity, more extreme poverty, more varied land values, and varying severity of despots for leaders. You would magnify problems, not lessen them. Compartmentalization is what keeps most of the world afloat, different economies with different currencies is something of a firewall, though with globalist business dealings and multi-national trade *dependencies*, that's not as true as it once was. That's where aspects of isolationism and independence begins to look more attractive. If X fails miserably, Y isn't drug down into the gutter too. IF we had one global economy and everything were mandated from on high, if it failed, literally everyone would suffer. That's a large part of why we have geography based nations to begin with. Another part, is because different cultures want different laws, which is why we have further subdivisions down into states, counties, and cities and even districts and townships. Maximal agency and independence without breaking down into some anarchistic nightmare.
As much as it sounds nice in theory, having one currency for the whole world would be a logistical nightmare. Different countries hvae different economies, resources, and levels of development. Plus, having a single currency would mean giving up a lot of national sovereignty. It's just not realistic or practical.
The best analogy I can use is this. Imagine a country’s currency as a dish of food. Each country makes their own dish for their own needs and desires. Having the same currency for multiple countries is like having a dinner party with just one type of food. It’s fine if everyone has the same taste but imagine if one person is vegetarian and another is keto and another is lactose intolerant and so on. The more people involved the more difficult it gets. Each country makes economic decisions based of the exchange rates of its currency. Having a low value currency could actually help a nation in a debt crisis by attracting foreign investment due to the good exchange rate. Also there’s the fact that having a single currency means that strong states have to bare the losses of the weak ones. as an American living on the east coast I don’t mind that the value of my currency is affected by something happening in Mississippi. Meanwhile for someone in the Eurozone it’s got to hurt as a Spanish person that your money is tied to the Greek debt crisis
I mean honestly that'd be pretty awesome imagine that just one currency around the world that would be quite the accomplishment nothing would go up or down no rise no drop now imagine if it was ready player one's currency
We can. There are no barriers to that. We don’t even need money. But these are not great options for most countries. Countries are in competition and want the best for their own people Giving up the ability to manage and regulate your own currency is a major downgrade for many countries, especially highly developed countries if they get connected to lesser developed countries.
Countries want to control their own money. One currency would put one body in charge of all the monetary policy everywhere and would be a disaster
You could. But governments don't want that because they would lose the power to tweek their own money supply / interest rates to suit their own countries' economic conditions (inflation and unemployment rates).
Interesting arguments put by others. It seems then having multiple currencies in the same country (very big countries like India) with say a zone wise restriction will be helpful. It will give central banks more control.
The closest thing we have is cryptocurrency and it is very volatile and there are still debates on how it can be controlled. A currency like the US dollar has a value decided through investments, fiscal policy, and is helpful in times of financial distress.
OH hey little guy! What's that? Why not just one money? Well... you see... all the big places in the world have kings, and all of those kings are really greedy and want to be the only king. Since every king wants to be the only king, none of them can agree on anything and really do good together. That, and if they each have their own money, they get to make rules and stuff so that they can get away with evil stuff. Sometimes they'll control the value of stuff to accomplish a secret goal, like making sure certain other people don't succeed. :/
Because different countries have different economies with different valuations. Like do you want Zimbabwe using the US dollar with their 26% inflation on their new currency after the collapse of their old currency?
All currencies are sort based on comparison with the US dollar now aren't they? As far as exchange rates go internationally anyway.
Different countries have different economies if everyone used the same currency then weaker economies would diminish its value and people in countries with stronger economies would have less spending power as a result. This creates a feedback where those stronger economies become weaker as their populace have less money to spend on taxable luxury items. We saw this with the recent financial crisis in the Eurozone, with hyperinflation in Greece harming the German and French economies.
We can, but before we can do that we need one government and one legal standard and one economic standard and one social standard and one... and folk who've tried to establish that generally aren't looked on too favourably so it never happens.
Who mints it and decides how much?
Because it’s a bad idea. Monetary policy needs to be flexible based on a countries level of development and industrialization. One size fit all solutions to problems as complicated as global economics never pan out.
It's hard enough getting a single country to just have one currency. There were still regional currencies in the US into the 1900s. Look at how the Euro has been received: lots of people are pissed off that their country's economy is being dragged down by others because of the shared currency system. There isn't a compelling reason to push world currency that isn't overridden by the problems it would create at this point.
We don’t trust each other enough. Someone has to be in charge of making the currency, and if they are making too much or not enough it creates problems for everyone. We don’t trust each other enough to even agree on how much currency creation is “just enough.”
Because the world is divided and to get anything like that passed through into law would take an overwhelming majority vote. When we live in a world where getting people to agree to *anything* is difficult, imagine getting enough people to agree on this would be a stretch. A lot of people are “traditional” and have a sense of pride in their currency which outdates the dollar by thousands of years. A lot of people are also anti-American and would resent any vote to be more “American” A lot of people are nationalists and don’t believe in a global society system. It would take a great amount of resources and re-education to change currency. When people are already struggling with the cost of living all around the world; this would seem to be a waste of resources. I remember when we changed currency in my country decades ago and it took a very long time to adjust. We changed from shillings and pence to the current system and 60 years later my grandparents still never fully got used to it. You know that joke about old ladies holding up the cashier in a supermarket counting pennies? Yeah it’s because she’s struggling to count the money because it changed. That’s where the joke came from. Some people aren’t good with change and they never really “adjust”
I haven't seen anyone mention cultural reasons yet. There's a lot of good answers here from a purely economic perspective, but currency also has cultural value. Just like a language, or a style of dress, or a tradition. It's generally better for everyone involved to preserve individual cultures and support people's cultural identities rather than try to create a shallow, false "monoculture," even if it does make transactions more complicated.
A reminder: you can always use gold. Nobody's stopping you. Or bitcoin, etc. Try paying taxes with it, though. France doesn't accept US dollars for payment of taxes; and the US doesn't accept Japanese yen in payment of taxes. Taxes are what give money its value. Not some muzzy idea of trust. The gov't has a monopoly on dollars and violence. They sent Capone to Alcatraz for not paying taxes. So, you can use whatever currency you want, nobody's stopping you. But until there's a planetary tax authority, there won't be a planet-wide currency.
Wouldn't that mean if one country messed up, the entire world's economy would crash?
There is a concept in economics known as optimal currency area theory, which states that, for a currency union to work, the area encompassed by it must have certain characteristics, among them: 1. Mobility of labor, ie people in the economy are allowed to move to where they and their skills are in demand 2. Mobility of capital along with flexible prices and wages, ie capital (read: money, usually to buy things like physical plant such as buildings, machines, etc) is able to move relatively freely and wages and prices are allowed to fluctuate so that the forces of supply and demand are allowed to balance 3. Mechanisms for risk sharing, most often in the form of money transfers from more prosperous regions to less prosperous regions 4. Similarity of business cycles, ie everywhere in the currency union experiences booms and busts at roughly the same time and to roughly the same degree. Beyond this, the value of currency is something governments can alter in order to make their goods more competitive on the international market for export in times where the country is not doing well economically as a means of spurring both employment and growth. This is a strategy perhaps most notably employed by China for much of the last couple decades wherein the value of the Yuan was seemingly intentionally kept below its true value compared to the dollar in order to drive export-lead growth in the economy (yes this is essentially why seemingly everything for a while was “made in China”). However, in the last few years the demographic aftereffects of the one-child policy have come home to roost in China, wherein the population is aging and does not appear capable of driving further economic growth via consumption. In general people consume a lot on average when they are between ages 20 and 50 (buying houses and cars, raising kids, taking vacations, etc) but not so much as they approach retirement age, and even less so once they are retired. This also explains why the hype over BRICS and specifically the notion of a unified BRICS currency is nothing short of laughable; beyond the more immediate problem that two of the countries (China and India) are actively feuding with each other at the moment, combined with the geographic problems imposed by such an alliance (South Africa and Brazil would need to get lopped off to make this even remotely workable), if one looks at a graph of the combined output of these economies it’s basically almost all China by a huge margin (like the other four countries are maybe 25% of the total and the rest is China) not to mention China accounts for almost all of the growth, so this operation in whatever form it would take would almost automatically be lead by China and it’s questionable whether such is palatable by the other countries involved.
Because different currencies have different origins, but the reason we can't consolidate/ unify the concept of "value" is that capitalism depends on some markets being stronger than others.
We kind of did for quite some time--Gold. Even though IOU pieces of paper were popular for much of it, gold was the standard bearer asset.
The labor of one Canadian is not equal to the labor one Cambodian. The value of one money unit is not equal in Norway and Chile.
A global currency would lack a central regulatory authority and a bank and it would be subject to no central one fiscal policy. It’s not feasible with the amount of division in this world. Humans have a long way to go.
A lot of people usually don't like other people and are rude and mean. Now let's buy you some ice cream.
Chocochip please
A lot of people usually don't like other people and are rude and mean. Now let's buy you some ice cream.
We can have one currency, but unless it's naturally occurring currency (like gold) then we have to decide who gets to "print" it. That tends to be a reserved sovereign right. Some countries have decided to use a foreign currency (or gold) instead of having their own. But, they can't have a "real" central bank that loans the government money at government-determined interest rates. Thats what "central bank rate" means. The interest the government has decided to pay on its loans. You need to control the currency to do this. The Eurozone is an experiment in "common currency," so it is possible. It just requires everyone to also share a central bank, the ECB.
Different jurisdictions have different rules on trade, they also have different demands, different geography, and different demographics. This means there is a difference in how that economy functions. Having a floating currency between two different areas means the differences created can be equalised by the difference in the value of the currency. For example pre euro if Germany sells audis to Greece and Greece sells olive oil to Germany. Money is flowing from Greece to Germany in aggregate. What then happens is the value of the Greek peso falls and the deutchmark rises. So now each olive oil sale gives relatively the Greeks more pesos and each auid gives fewer benchmarks in aggregate for the same sale as each is converting to their own currency. This means it's cheaper to Germans to buy Greek stuff, so they can buy more of it eror reducibg the trade deficit. It also means investment into Greece is cheaper, interest rates must rise in greece , it also means that deuchmarks provide less interest (yield), people cannot afford as many things priced in deatchmarks, and it also means inflation in Germany rises as the demand for currency is higher. Over time this also means the trad deficit shrinks until equalised......the difference is all In both economies is expressed in the exchange rate. In the current euro system that doesnt happen, so to equalise which is what the greek debt crisis was ultimately about. It ultimately means that instead of standards of living staying the same, but currency changed value. The euro currency stayed the same, so to equalise the trade deficit standards of living in Greece had to fall so that labour costs equalised the issue by lowering costs of production. You can argue if that is morally good or not. My view is it's inherently bad to have such disparate economies linked as a one-size-fits policy,as it is not stable. As you can see currency exchange is a way to manage your economy to your spevific needs, you base rate, your tarrif policy, your government spending policy, your trade rules policy. Without that a government is severely limited in its way of handling fluctuations in economics between it and other countries.
Isn't that kind of what cryptocurrency would like to achieve?
Getting the entire world to agree on anything would be impossible, never mind something that would require an overhaul of every single currency. It would also decrease stability of the chosen currency, because everybody can make the currency
Great answers already, so here's a bit different of a take: He who controls the printing press (for the money) controls the entire economy. So if everyone used a single currency (let's use Dollars because I'm a self-centered American): 1) Maybe we let USA keep producing it, and they just make enough for the whole world. Well, now the USA can directly control the rate of inflation for the entire world by printing more/less money. If the USA is having an economic crisis, they can react to it with monetary policy. But if anyone else is having a crisis, they have to ASK the USA to react to it. 2) Maybe we let everyone print money, since they're all using it. Now any country could just print money to pay their debts, driving rampant global inflation until the entire currency falls apart. Can't do that. 3) Okay, so we establish a 3rd party, a completely country-neutral entity. Like putting the Money Factory in Antarctica, maintained and regulated by a mixed group from the largest countries in the world (economically). But this basically just takes us back to option #1, just with added layers of bureaucracy and diplomacy that'd probably mean NOBODY ever makes any changes to how/when money is printed. 4) Or maybe we just stop printing money entirely, except when it gets properly disposed of (the entity in charge of printing destroys 1 old dollar, and prints exactly 1 new dollar to match it). Now there's no dials or levers to control on the money supply, and deflation occurs rapidly as the GDP continue to grow without any increase in the availability of money. And we send the whole world into a cash grab tailspin of hogging physical money in order to profit off of the deflation. **TLDR:** **No country would be willing to surrender the sovereignity of printing & regulating their own currency. Just look at how difficult it has been for the EU and the Euro, and imagine trying to get the USA, Russia, China, North Korea, Iran, the UK, and Somalia to ALL agree on any global currency policy together.**
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Always seems to make more sense to me if we’d cut currency exchanges out of trade. Form a company in the US. Buy US products with US dollars. Trade to Japan, and get yen in Japan. Take that Yen, buy Japanese products and trade to US for US dollars in the US. Repeat cycle. Near as I can figure, there wouldn’t even be trade imbalances or deficits.
Right away, after we decide on who gets to be in charge of printing that money. For a country to use a currency some other country is printing is a really unpleasant proposition. Some countries do it, but it's sort of a last resort. Basically the entire country will end up paying inflation tax out of the country, rather than keeping that value within the borders.
Currency is worth whatever backs its value. Many currencies have been based on gold or silver standards, meaning each unit of currency is worth an equivalent value of gold or silver. This strictly requires a unit of goods exists for each unit of currency. If all currency was set up this way, it would be possible for a universal currency. Many modern currencies are *fiat currency*. These have value only because the government that guarantees them backs them against its economy. There is nothing tangible that such a currency is worth a standard amount of. If the economy tanks, so does the value of fiat currency. As a result, a government can physically print as much fiat currency as they want, but doing so makes each unit of currency worth less as supply goes up (i.e. inflation). With a single universal currency, a country could start printing lots of cash, giving them a lot more cash on hand at the expense of everyone else using it. A single world currency is possible with very strict controls over the backing, printing, and circulation of currency. This would require each involved economy to be on similarly solid ground. You could read up on the Euro and member states of the EU to find examples of the difficulties involved in a shared currency.
As long as currency is tied to entities with politics there will always be conflicting interests, influencing the perception of the value. A true one world currency would be a decentralized non political measure of value based on universal trust. Forget backing it with gold or clean water as collateral because whoever controls the underlying assets controls the currency. Even digital currency has its limitations due to lack of accessibility and digital attack vectors.
Bitcoin is the currency you are talking about. It’s so early that most people believe it to be a scam. Check in around 20 years from now.
There's a reason that most people believe it to be a scam, y'know.
Yes it's because most people don't know shit.
I know plenty of shit and I know a get-rich-quick scam when I see one. I think bitcoin as it was originally envisioned had potential to be something beyond that but not enough people are willing to use it that way for it to work.
And how was it originally envisioned and how are people not using it that way?
We mostly do, it’s called the US Dollar, it’s used in trade all over the world. However it’s starting to lose some ground, it’ll be interesting to see how that pans out.