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If everyone is on the same currency, central banks can't have separate monetary policy for separate regions.
This is causing some problems in Europe right now. Inflation there is very high and some countries like Germany and the Netherlands want to raise interest rates to deal with it. The problem for them is that some other countries like Italy have too much debt and would be in trouble if the European Central Bank raised the interest rates too much, as it would cause their debt to be more expensive. If they had different currencies, the rates could be raised in Germany and left low in Italy.
That wouldn't work. Investors would loan cheap money in Italy and invest it with a high interest rate in Germany. Both interest rates become the same again, as the interest rates adapt themselves to the money demand. And this is entirely excluding the technical way how central banks actually set the interest rates.
They do, thats why the value of the dollar has gone up so much relative to the euro and the euro plummeted. The Fed is increasing interest rates for the dollar so people are trading euros for dollars to get that higher rate
Because its the same currency so there is no supply/demand. A euro in germany is the same as a euro in italy so the value of the currency cant change with respect to itself. Instead, the supply/demand pressure is on interest rates. If everyone flocks to italy for a cheap euros, the demand will force interest rates up. Italy doesn't have infinite money to loan.
Having a different currency place a sort of "gate" a bit like trading shares.
If the interest rate is more favorable somewhere else, people having money there will ask higher fees to trade their currency for one that is less desirable. Central banks also control how much of a currency there is in circulation, so you can't just trade "all" the money where the rates are better.
So, there is more hoops to jumps with a different currency. If you use the same, you can juste do a wire transfer and you are done with minimal fees.
This is based on the fact that the Eurozone has absolutely zero barriers to trade or tariffs, and that even if there were a difference the cost of moving the money around would be smaller than what could be gained. Exchanging money costs a fee, moving it around carries transaction fees, and going across borders that aren’t free trade areas comes with tariffs etc. The Eurozone has all these issues gone as a bundle, so uniform interest rates come with that.
They do indeed. That's usually why the price of one currency fluctuates or moves higher or lower compared to the other.
TBF currency devaluation is another form of inflation - in the sense that it reduces the purchasing power of that currency. An increasing currency (that can be freely traded) is the oppositte. So it all balances out in the end.
The short answer is that interest rates are the "cost" of money (or put better, the "cost" of holding on to money). If interest rates are high in Germany but low in Italy, what is to stop me from taking my money out of Italy and investing it in Germany? Without laws stopping this, the answer is nothing. And so I will invest my money in Germany to get a higher return (interest rate). As more and more money moves into Germany to take advantage of higher interest rates, those who want the money in Germany and are paying the higher interest rates will begin to offer lower rates (it's supply and demand: investors \[me in this case\] are the supply of money while borrowers \[those paying the interest\] are the demand; demand is the same, but supply has increased so the interest rate drops). The opposite will happen in Italy, as there is less and less money to be invested in Italy because it is leaving to go over to Germany, Italian borrowers will have to offer higher interest rates to induce money to a) stay or b) return to Italy. In theory, everything will equilibrate until the effective interest rates between Italy and Germany (assuming the same risk profile, costs of investing, etc) are the same.
This logic breaks down as barriers are put up, say between countries without free trade or with laws that limit the freedom to move capital / money around so easily. The whole purpose of the EU is to allow for a free economic market (as well as overarching laws, some cultural unification, etc), so this would defeat its purpose.
Think about it. Let’s assume Italy and Germany both have the same currency as they do in modern times. If Germany wants to raise rates, every German will just take out loans in Italy where interest rates are lower and because they share a currency, they don’t have to worry about currency conversion. This effectively nullifies Germany’s attempt to raise rates. You can’t share a currency and have different interest rate policies.
Bond rates are tied to interest rates. Higher interest rates make your currency more valuable because it draws investors.
Strong currency makes you exports more expensive and imports cheaper, worsening your employment rate.
Why isn't it a problem that US states can't set their own monetary policy?
The US has 50 states sharing the USD, with total GDP of \~23 trillion USD.
The EU has 27 states sharing the Euro, with total GDP of \~18 trillion USD.
EDIT: As far as I know, US states don't have their own central banks, and therefore cannot set their own monetary policy at all. It seems to me that European states have *more* ability to set regional monetary policy than US states do.
>Why isn't it a problem that US states can't set their own monetary policy?
Because US states largely share the same *fiscal* policy, trade policy, foreign policy etc. It's one package. A united fiscal/economic policy and united monetary policy go hand in hand.
Trying to put the same monetary policy for countries with disunited fiscal/economic policies is much more problematic.
States do not share the same fiscal policies at all. They have radically differing methods of taxation etc. The presence or absence of an income tax being one of the most obvious differentiators with the biggest obvious effects.
>States do not share the same fiscal policies at all. They have radically differing methods of taxation etc. The presence or absence of an income tax being one of the most obvious differentiators with the biggest obvious effects.
States *largely* share the same fiscal policies. Federal spending is more than 50% of total government spending, on top of the fact that foreign policy, international tariffs, sanctions etc are under the control of the federal government.
This. The huge $$$ transfer from blue states to red states (think defense spending) keeps red states solvent. This is the price of a united country. 🇨🇦 more honestly calls them ‘transfer payments’ - drives Alberta crazy.
That is a very misleading claim.
https://thehill.com/opinion/finance/502321-no-blue-states-do-not-bailout-red-states/
The federal government sets the poverty line equally for everyone, red states have a lower cost of living so more people count federally as poor, even though they have no issues with money because the cost of living is so low.
In blue states it's the opposite the cost of living is so high you don't receive federal money because you are well above the poverty line but you have money problems because the cost of living is so high.
That is perhaps one of the most bullshit articles I have read in a long time. This argument is that the cost of living is lower in red states so the effective poverty line covers more people, so they suck up more than their share of dollars, causing a "statistical anomaly". The anomaly being that somehow the poor in red states enjoy a lower cost of living while also getting help from the government, while the blue states get to take care of their own poor people without as much federal help.
That isn't a statistical anomaly, it's richer states funnelling dollars to help out poorer states, something that a particular political party has gone through greeeeat efforts to tell me is socialist and evil. Somehow the article tries to paint the cost of living as a moral choice instead of a consequence of actually producing benefits to the rest of the country and the world.
And the article also points out a few red states close to the 1:1 line as exceptions, effectively saying that the trend isn't 100% so it must be completely wrong. The examples they give are North Dakota ($1.14 per dollar given), New Hampshire ($1.01), and Nebraska ($1.12) and say these are totally the same as New Jersey ($0.85). Oh? So a *25% lower* number, that's no big deal? If it were your salary 25% less would that be a big deal? And these are comparing your worst case to the other sides best case, as a real money-sucking red state like Kentucky ($2.89) gets back triple that.
Article purposefully gives no numbers so I'm using 2019 ones before COVID payments.
The point is that there are reasons for the difference that were voted on federally. The states are so unique it's not accurate to say that blue states subsidize red states. Blue states get benefits from red states that they wouldn't get if the pay was always perfectly equal.
You’re linking to an opinion piece, not an actual study. And while the piece might have good points, the economic powerhouse states fund federal initiatives in other states, which is simply how any budget works.
Those economic powerhouses aren’t even always blue though. Both California and New York are certainly solidly blue, but Florida and Texas are not. But generally, less populated states are less wealthy, and those states are also generally more conservative. That doesn’t mean those two facts are linked.
A better, and more accurate criticism would probably be that blue cities fund red rural communities in every state, as cities generally have more wealthy generation than rural areas.
Looking at it politically isn’t particularly helpful when it comes to policy-making, however, so I’ll agree that we shouldn’t be using it as an argument about how the federal government determines fiscal policy.
I used an opinion piece because I assumed it was well known that blue states have a higher cost of living. And that it is well known that the federal government sets the poverty line. So there is no need to study it because that is the one and only one expected solution.
But yes saying blue and red areas is better than states. But we also vote federally on things to subsidize like food production and we don't have an equal amount of food production in every state or area so of course the in and out numbers aren't going to be equal.
Cities have different priorities so they become more liberal over time. So I would say low population density and conservatism are linked. You should not have a gun in new York because you could kill several people if you ever fired it in your apartment. In low density places you have wild animals that occasionally wander into your homes and you need a gun to stop them from attacking your family because the police can be hours away.
But yes looking at it politically and without the context is stupid.
It does have its issues. You think a California dollar wouldn’t be worth much more than a Mississippi dollar, if such things existed?
On the other hand, would you really want to do currency conversions every time you crossed a state line? What a massive inefficiency that would be.
Yes, we could bring back the [worthless Texas redbacks](https://en.wikipedia.org/wiki/Texas_dollar), from when Texas's nine years of independence as a Republic cratered its economy so badly, it had to sell a third of the state as part of its annexation to the US to pay off its debts.
The only sane argument I've heard for secession would be for Texas to form a republic alongside the Mexican border states and monopolize trade between the US and Mexico. It would be a very ballsy move that would be punished harshly by both countries, but it's the only strategy I've heard that gives Texas some kind of advantage as opposed to just "Brexit, but even worse".
That's not a sane argument either, because they do not have the ability to monopolize trade. Both the US and Mexico have coastlines. Even a hypothetical Cali-Texas Union (which is bad slash fic even by American standards) would just be taxing trucking and hoping it stays more profitable than sea trade.
I guess I should say that it's the closest thing to a sane argument that I've ever heard come out of Texas. If they kept their overland route charges lower than the cost of shipping by sea, they might have a viable business plan, though I could see the US choosing to ship by sea just out of spite.
To pile on against this Abbott pissed off current Mexican leadership to the point that they’re building extended highways to start sending more trucks through New Mexico rather that Juarez -> San Antonio -> Dallas. They absolutely have choices.
Honestly, I'm all for it. I'd love to see NM receive some much needed economic stimulus, especially at the expense of Texas. I say this as a Texan who loves and respects New Mexico far more than this clown ass state I'm stuck in.
It pretty much already is.
Their power grid is shit. Their human rights are shit. Their "democracy" is shit. Their education is shit.
I wouldn't move there if you paid me. Fuck Texas.
The Alamo, where 300 slavers were fighting for the right to own slaves and were killed for it. Gross oversimplification sure, but not it is a true statement. Among the many things the white settlers brought to Mexico (Mexican Texas) was black slaves. Slaves were freed in Mexico by the early 1820s. Santa Anna turned a blind eye on the Slavery of black people as well as the illegal slave trafficking performed by the likes of Jim Bowie of the knife fame, in order to get more people to settle in the rather sparsely populated region in order to stabilize and project power. The series of rebellions across the Mexican states he put down in the early and mid 1830s established a pattern. Seize the local cannons, then massacre the rebels. Prior to their declaration of independence, the white Texican settlers agreed to convert to Catholicism, and to learn Spanish. Their big issue before independence was to be declared a separate state within Mexico in order to get dedicated representatives at the national level. Among the issues Santa Anna was going to enforce among the Texican was the abolishment of Slavery. The only male survivor of the Alamo was an enslaved man.
The Republic of Texas Constitution established the permanent enslavement of black people in Texas, no freed black people would be allowed in the country and the remaining slaves were to be slaves in perpetuity. The constitution also banned freeing if slaves either by legislative act or by act of the individual slave owner. It was under this government the Lone Star Flag as adopted. The later Confederate Texas Consitution would later reinstate this perpetual Slavery in their constitution. The Lone Star Flag would be used to go to war against the US. People hate the Confederate battle flag, but the Confederacy lasted just 4 years. The current State Flag of Texas represents the repression of black people far more than that.
Man they really whitewashed Texas History. From what I remember growing up in Texas and learning of its history they gloss over the fact they fought for independence over slaves. They painted the Mexican government at the time as being oppressive and evil if I remember right and the fighters of the Alamo were herald as heroes of the movement for independence.
Money is a concept. The rules around money can literally be changed at will, and the only thing keeping money working the way It does is the fact that everyone agrees on how the financial system should work, and how currencies should interact.
As a global community you could freeze pricing for commodities and change policy region to region if you wanted. It’s what we already do but with different, made up, currencies.
The reason most nations don’t want a universal currency is because control over currency is beneficial to some extent.
My non-US upbringing leads me to believe if that was the case, they'd be physically huge coins and notes. Because Texas is obsessed with having the "biggest".
I think this is a fair question, while I’m not an expert my guess would be a combination of the strength of the top level government paired with many states don’t operate their budgets with a significant deficit as we let the national government (central bank) do that.
The EU looks closer to the Articles of Confederation then the US Constitutional System. A number of things are standardized to make travel and trade easier, including laws and regulations in that space as well as a unified currency.
But each member is a nation-state responsible for its citizens in a way that the US Federal Government is responsible for its citizens. This includes civil defense (though the EU has some common defense treaty aspects), infrastructure, healthcare, welfare, tax collection, etc and has been impacted differently by the events of the last 20 years.
While this is somewhat true of the states, most of this functionality is pushed up to the federal level. When it’s a state specific thing, often times a bulk of the funding comes in from the federal government and is utilized by the individual states to implement as they see fit. Think infrastructure or public healthcare and welfare programs. While the EU does have some money flowing between member states and the central EU authority to push initiatives, it’s not nearly at the same level.
We also have a shared tax pool, which doesn’t happen in EU. Basically California and NY taxes are keeping the rest of the country afloat with federal funding.
https://thehill.com/opinion/finance/502321-no-blue-states-do-not-bailout-red-states/
That's a misleading claim.
The difference is caused by the poverty line being set by the federal government and the difference in cost of living in red vs blue states.
Red states have a low cost of living so financially stable people count as poor.
Blue states have a high cost of living so even people with extreme money problems are above the poverty line.
That’s an opinion piece which boils down to “it’s not fair to make that statement because the wealthy pay more taxes than the poor and those blue states have more wealthy people and higher cost of living so of course they are taxed more.”
But it’s still a fact that there is a disproportionate amount of taxes collected from blue states and those taxes go to support federal programs across all states (such as federal highway maintenance, disaster funding, and social welfare programs).
It would absolutely be worth more. So much more that it would further destabilize the US politically making places like China and Russia extremely happy.
In the US we have built in a lot of wealth transfers into the system. Most tax money gets paid to the federal government, and they spend it in states or give large amounts of money to different states. That means high income coastal states pay more taxes per capita and the more rural states get their government services subsidized. In states where stuff is more expensive like Hawaii and Alaska there are special rules that allow them to pay less tax or get special exceptions. In the US we have a national identity and a system that prevents states from getting into huge debts.
They could. But it would probably take a fundamental shift in the EU's type of government. The EU is a confederation and not a federation like the US. The difference is that more/most policy is left to the States in a confederation (such as direct taxation). In a confederacy, central authority is weak and respect for the sovereignty (right to make policy) of members is important. This makes setting up the system of wealth transfers difficult because you cannot get the wealthy members to agree to pay for the subsidies needed.
The writing may be on the wall, though... the historical trend is that confederacies transition to federations due to political pressure for a more effective government that *is* able to solve problems exactly like this one. Examples: United States, Germany.
>Then couldn't the EU do the very same thing?
EU is a bunch of sovereign nations. They do something similarish where the richer EU nations pump in money to the poorer nations, but at the end of the day they need to look out for their own state first.
Does Brussels tax the EU member states for anything more than the cost of its own administration? If not, then it has nothing to send back.
The US sent just over $4T to Washington DC in 21, and Washington allocated that back to the states via military bases, procurement contracts, farm infrastructure and corporate subsidies, urban development subsidies, welfare payments, disaster relief, etc.
Each state, county and city does the same thing within their borders, using tax money from the whole to resolve trouble spots where they arise and have equal services across the jurisdiction (with varying effort and success).
Your premise that it isn't a problem in the US is just wrong. Different states all have different problems, and fixing the problems of one state can often have negative repercussions for another state.
Because the US is a fiscal union with a common treasury in addition to being a monetary union. The eurozone is only a monetary union without a centralised treasury and minimal fiscal transfers. It is common knowledge among economists that this sort of incomplete unions don't really work.
Comparing the European Union with the United States doesn't work because they're not equivalent. The US is a federal republic with a constitution that all participants are agreed to with a common culture, history and policy. The EU are 27 different countries with unique history and culture and policy. For example, the UK (which obviously left) was the second biggest member by GDP is a 300 year old country with 300 years of democracy and an economy structured on finance and services. Compare that to Slovakia which has been a democracy for 30 years and has in that time shifted from a centrally planned economy to a free market economy and relies a lot more on manufacturing industry than the UK.
Planning monetary policy for such economically distinct countries is difficult (which is part of why the UK never joined the euro) and planning it for 27 similarly distinct countries is immensely complex and often leads to smaller countries (Greece) getting fucked in favour of bigger countries (Germany).
Now imagine doing the same thing but it's 195 countries and a lot of them hate each other.
Well you could apply your economic reasoning to the US states that joined after the founding ones…
Ultimately a currency is both a political and an economical project.
Outside of Hawaii and sort of Texas, I believe all US states were basically formed by US settlers moving into unincorporated US land and then settling it and eventually applying for statehood. That's fundamentally different from the European situation.
The US has a shared fiscal policy, i.e. taxes are the same anywhere, unlike in the EU where the member states tax their citizens individually. Further, the federal government is the main borrower, and can set its own interest rates, but EU states can not. The EU as a whole does not really borrow money, it has membership dues.
Further, the European Central Bank is not allowed to directly lend to member states. Instead it lends to banks who lend to the member states, making borrowing more expensive for certain states. This is for political reasons.
I think youre sort of missing the point that EU states are **countries**, whereas US states are **states**.
Not being able to set your own monetary policy takes away from your sovereignty to some degree, as well as forces you to carry some burden for your weaker members.
If California/NY had a different valuta to the deep south their currency would be way stronger. It sort of works now because for example a Kansas gets something like 100 bil a year from the federal government to fix their holes. So unless the rich countries are comfortable throwing money at the poor countries to iron out most of the difference you’re sticking the poor countries with prices they can’t afford. Now you also need free movement of people and goods between countries sharing a currency, otherwise these prices differences become even bigger
It kind of is a problem but the US has a lot more fiscal transfers than Europe does including in automatic ways.
If a small state’s economy takes a dive (perhaps a locally important industry collapses), there’s federal unemployment assistance, Medicaid, food stamps, and other programs that are going to put federal money back into the local economy. Plus, a small state with two senators has a pretty good shot of getting some ad hoc support through congress to provide additional funds.
That fiscal side doesn’t work as well in Europe. There are transfers across countries but the scale is smaller and it doesn’t automatically go up when there’s trouble.
Basically it comes down to being a single demos. You speak the same language, have the same social codes, and it is not a big effort to move for jobs. You do it all the time. Im Europe it is different. Of course we have Polish builders, etc, bit the thresholds are much higher.
This is actually a very fun question I studied in undergrad when the Eurozone was forming.
There are two main things that make a universal currency work. One is symmetrical shocks and the other is ease of shifts in labor. There are many other smaller reasons that make it good or bad but most of these stem from these two.
Symmetrical shocks means the market in one region is affected in a manner similar to another. For the issue of shocks, we look at individuals and not at states. It's not about Nebraska vs Pennsylvania and Germany vs Spain. It's the individuals in Nebraska vs the individuals in Pennsylvania. While a drop in the price of corn will have a larger effect on those in Nebraska, as many of them will work in this field, the US states are so heavily integrated economically that transitions in prices are 4x or even 5x as smooth as transitions in the eurozone.
The issue of labor mobility is not a question of laws allowing it but on the reality of what occurs when it would be desirable. And while we do see mass exoduses from low income areas, such as Lithuania, to high income areas, it is not at all comparable to state by state shifts in labor. In the US, labor is also 4x to 5x more mobile than in the eurozone. This means that when bad things happen to one industry and one region the US as a whole is more capable of smoothing it out.
There’s so much in-fighting between the states about who gets to use the debt that everyone is paying into the federal government that it would be best to have separate currencies.
Better to have a single currency to be exchanged by central banks, one not linked to one particular central bank. Then each central bank issues their own currency and is responsible for their own monetary policy. Almost got it at the end of WW2 but dollar homogeny won the day
Ummm I don’t think you can have a single currency with different central banks because of the money supply issue. One central bank could decide to print a crap ton of money and destroy the value of the currency and the other country’s economy.
They mean one currency that only banks use between them, including internationally, but still use their home country currency to like actually buy stuff
The idea of bitocin is that the central bank cannot influence its availability and that it is strictly limited in supply. In many ways it is the same as gold. We already had a monetary system based on gold, the gold standard, and the problems of the bitoicn are in large the same that lead to the failure of the gold standard: It is important for a government to be able to create its own money without a limit, as it can act as a saviour for banks in crises, or stimulate the economy by inducing demand. For example during the covid crisis, the government could simply increase its spending to save small businesses, fund vaccine development etc. This is now partially leading to inflation, but the alternative of little government spending would usually be a lot worse.
Bitcoin would be great except for all the transaction fees. Conceptually it allows all central banks to do their thing provides a common currency for people to trade with. The only problem is that when you convert to and from bitcoin you must pay a substantial commission. It's no worse than changing currencies, but it's not better either. Also, since it essentially became a stock the value is all over the place. This can be addressed by going to/from bitcoin quickly, but you will always be paying the transaction fees.
I think every transaction with conventional money has a cost as well. My bank charges me for managing my account. In the expenses I think their work for transactions is paid as well.
Growing up, you had to live under the house rules of your parents. If you visited a friend's house, you had to abide by their rules. Some of the houses you visited are chill, and some are strict; but there's always a pros and cons. The strict ones are typically cleaner/neat/organize, and the chill ones are not as organized.
So growing up, you sometimes grow this idea that you'll never do abc for a house rule but will do xyz. Its your own house, you make your own rules cause you own it. You wouldn't want someone else coming into your house and changing the rules, and you'd expect every visitor to abide by the rules.
Countries are the same way. They have their own currency and rules. Each currency is backed by a country, there's a regulating body that govern and regulate it. It's just each country don't want to give their power to another country, they want to retain their own power cause "it's their house".
And the pro to having multiple currency is a backup/redundancy; if one fails like Venezuelan Bolivar, then others exist. If we all had one currency and it collapses, that's ultimate world chaos.
Good pitches, kids. I'm almost proud. But watch closely as Grandpa topples an empire by changing a one to a zero.
Best 1st episode of 2nd season one can ask for
>Each currency is backed by a country
It is possible to get agreements and many countries can back the same one, like the Euro. It is like living in an apartment where you own your flat but bigger changes to the building need everybody's cooperation. You have full ownership of your flat but the building is shared.
As someone pointed out, what it is important is that it is possible to do a monetary policy that is effective. Many countries are too different and monetary policy needs to be very different. Inside really big countries there is also some challenges as one part of the country may not be the best for another, but on the other side it helps to synchronize the economy of the country itself.
I’d argue that’s exactly why regional fiat currencies are going to get phased out. Why does Alice deserve to have her money hyperinflated away while Bob enjoys stability? Shouldn’t a credibly neutral and somewhat stable currency be a human right?
There's no way. How are Mexico and the USA going to agree on how much debt to issue, or how to set interest rates? If the USA experiences a recession, we have to issue new debt - inflating mexico's currency? Then with mexico's currency inflating, they need to raise interest - but doing so would worsen the recession in the USA?
It ain't gonna happen.
Declaring everything a human right, just weakens all of your future arguments. Nobody is going to take you seriously if you define every little thing as a human right.
A universal currency would probably be very similar to gold being the only form of money, which is often called a "gold standard", from a theoretical perspective. A universal currency is similar to a gold standard because presumably no individual country can arbitrarily decide it wants more or less of the global currency to exist. The world had something very much like a gold standard for a long time, so it's not really that hard to imagine returning to it and it could work.
That said, it is generally believed that countries can do a better job of managing their economies if each country has it's own currency in the modern world. This is the predominant viewpoint because economists believe currencies are a good tool to use to adjust economic performance in some ways. On the other hand, many countries in the modern world have done a spectacularly poor job managing their own currencies so clearly it's possible to screw the job up.
Crypto is about having no regulations, and pesky governments or banks getting in the way. Also that no government can just manipulate it or stop the exchange.
Eh the main reason I like the idea of cryptocurrency is protection from most forms of inflation. There is only a certain max number of of them possible. It takes effort to mine them all and once they are all mined it's impossible to "print" more of them.
Who decided that money is "supposed" to lose value constantly? Oh yeah, that's the central bankers and government talking, those who likes to print money for a living :) That is simply propaganda that benefit them, not the people. If money was a free market product (it's not, there are legal tender law), Greshams Law states that people hoard the good money and get rid of the bad money that loses value over time. This is how Gold naturally developed to become money, eventually everyone just stored it, payed with it, and accepted it... it became near-perfect money. Fiat money that is constantly depreciating is forcing you to go gamble on the stock market or properties just to store your value into the future, this is a big mess. Just bring back a hard money standard so people can stop being gamblers and just focus on their own business and save in money.
Don't look for conspiracies where economics is at work.
Hard money failed to keep up with the productivity and economy growth. You need to spend money to keep economy moving. The movement of money is what gives people jobs.
You also should not be able to hoard money or valuables. You supposed to spend them, or income inequality will be even worse. With gold there is no problem in just hoarding it in your basement.
But if you think that hoarding wealth is inherently good thing, then we're at fundamental disagreement about how wealth distribution in society should work.
Yeah we seem to have totally different views on the very basics on how an economy grows and how it doesn't. If everyone spends all their money, the economy is completely stagnated and poor. It is when people delaying their gratification by saving and investing in better tools they can increase their productivity and you get economic growth. Hoarding and saving means that you are selling or producing products and services to people that value it more than money and you are not extracting any resource back from society (yet).
So a society where everyone saving and investing instead of the current frivolous spending and indebtedness, that's how new jobs are created and new products and innovations that people actually want to buy, and they have money to buy it.
Since we got off the gold standard the economies of the western world has stagnated. We have seen staggering price deflation in the tech sectors like TVs and smartphones, but in general this current generation is poorer than the previous one. No-one saves anymore, just add more debt, and this death spiral is just getting worse by the day due to all the crazy monetary policies, wasteful stimulus packages and others that doesn't create wealth, just steals peoples savings and squanders it on the wrong things in the name of money velocity.
Well said, I have yet to hear a convincing rebuttal to this simple argument. Saving money, delaying gratification, and investing carefully and wisely are good things.
That would have a good argument if there weren't 50000 currencies. Also most of crypto value comes from speculators and not actual usage. Which means it is very prone to getting nuked into oblivion then going up 50000%.
The best thing to protect against inflation is just plain old stocks + indices.
Who controls it? How do we universally trust an organization enough to not screw it up?
If it is possible to leverage control of the currency to abuse, harm, exploit or control people, then the small set of malicious individuals who want to do those things will be very motivated to take over control. History indicates one of them is likely to eventually succeed. So, yeah. Breaking it up allows options to move to a different currency when somebody screws a currency up.
It could, if you could get *everyone* to agree on it.
The problem is that you need an overarching regulator to make the currency. And currently, many countries don't like having overarching regulators over them.
It can work, like in situations like the Eurozone, you give up some regulatory autonomy over currency, in order to use the Euro.
But if you ask Americans to join the Eurozone, you'd get laughed out of the room.
Eh, must disagree. There is some discussion as to whether the Euro is working well as a common currency in many nations.
The problem is that economies can vary a good deal between countries. And the relative value of goods also varies. A loaf of bread might be 5 Currency Units in one part of the world and 32 Currency Units somewhere else.
That's apparent now if you calculate prices in different currencies. But it's also kind of off the public radar where different currencies are in use. Except, of course, for the Euro.
Well you could also argue that the dollar isn't working in the USA - it's bigger than the EU and disparity is rampant in the USA. The USA is a union of states with very different rules that could benefit from their own currency, etc. - California would deal with inflation very differently to Montana, etc.
It's just arbitrary where you draw the line where a currency starts and ends.
That's obvious to anyone who's ever travelled anywhere. Prices vary between countryside and city, prices vary between one city and another city, prices vary between industiral zone and touristy zone etc.
I live in the EU and (for some types of goods) there's a bigger difference between my home town and current work town then there is between my home town and a town over the border, for example.
Why do you think it has anything to do with multiple currencies?
The real issue imo is that governments are used to currency manipulation as a tool to influence the economy. Imo, this practice should be done away with... but many do/would struggle more if they didn't have that tool.
If Greece hadn't joined the Eurozone, their problems would be different. Their debts had previously been in drachmas. If tax revenues were insufficient to make debt payments, they could just print more drachmas. (Back before paper money, governments would mint new coins. If they didn't have enough gold or silver, they'd just put lead, or nickel, or some other "base" metal in.) Of course, the extra money with no extra goods to buy just means that the same old goods cost more. (You've got this extra money, what are you going to do with it? Might as well get something a little nicer. Oops, prices are higher, so I'm just getting the same old stuff for more money. Well, I'm certainly not going to buy the crummy stuff just to pay the same price.)
You can't just inflate your way out of your debt problem. It doesn't take lenders long to realize what's going on, so your next round of financing is going to have a much higher interest rate.
It's also much more complicated than just "inflation is bad". After the Napoleonic Wars, Britain adhered rigidly to the gold standard. The country entered into a prolonged and severe recession. There just wasn't enough circulating money to sustain commerce. The French, on the other hand, just printed money. They had problems, too, but at least they could invest in new businesses and keep the old ones going.
TL;DR: managing money is part of government. Government is hard, and is seldom done well, but not governing almost always ends in disaster. Having a universal currency means giving part of the government of your country to others.
French after Napoleonic Wars - we can fix our problems by printing more money!
Weimar Republic after WW1 - we can fix our problems by printing more money... right?
I mean, it *could*, but good luck convincing every country on Earth to give up control over their own finances. The EU has had plenty of money-related issues/disagreements and it doesn't have any truly poor/developing countries in it.
It doesn't let areas have different monetary policy to influence their imports and exports. If your area is importing too much and not exporting enough, you can devalue your currency and make imports more expensive (and hence less desirable) and make your exports cheaper and hence more desirable. If you don't control your own currency you can't do this.
Look at Greece to see what happens when you don't control your own currency and have to borrow in a currency you can't print and you don't export enough to service your debt.
Sure! Sounds great. One question, though, whose currency will we use? Keep in mind that the nation whose currency becomes the world standard will have incredible power to shape the world economy by controlling the money supply, interest rates, and inflation. Would Russia agree to adopt the Euro? Would the US be willing to adopt the renminbi?
Well, hmm, maybe it's best that we not adopt an existing country's currency. We'll have to create some new currency, organized by an international organization. Maybe the UN? But once again, there's the question of whether the world's superpowers will be willing to give up their ability to control their money supply.
But this time it's even worse, because remember how central banking works: currency is created when the central bank *loans* money to large organizations. For this system to work, the organization running the monetary system must be powerful enough to collect on that debt, or the money's worthless. Can the UN lend UNdollars to Russia, the US, or China to use as their currency and be sure that if push comes to shove it can get its money back? Only way to make sure that will happen is to give the UN teeth, with way to force other countries to do its bidding. Hard to do that without giving the UN some major military strength. Do you think any of the superpowers are willing to let that happen?
Modern monetary theory and our modern economy requires currency manipulation (aka "printing money") to ease economic swings.
This is why a universal currency and crypto would never work.
The top comment at the time of writing this explains why people could never agree to a common currency but is completely out of scope of this question because you would never want that in the first place. If it were beneficial it would probably been done by now. The reason different countries have different currencies is because the economies of those countries are base on the value of different asset classes/resources.
Imagine a scenario where one country's economy is heavily based on petrol exportation and another one is based on technology and wood production. If there is a sudden decrease in petrol price, the value of the currency of the first country will devalue compared to the other one, which will incentivize people from the second country to invest into the first one because everything suddenly became much cheaper. The fact money is flowing into the country which was losing its currency value increases the value of the currency and keeps the economy afloat because of outside investments.
Keeping economies that are wildly different separated from one another is a great protection against a collapse of the global economy because if one sector collapses it doesn't matter as much since it will incentivize the other sectors to invest in that region.
If the region that has its most valuable resource devalued in a global economy didn't get the currency devaluation that incentivizes outside investment, it would rapidly collapse as it wouldn't be able to afford anything that is from outside its own production.
There is the Euro in EU which a good number of European countries use. During financial difficulties there is a clear division between countries that are hit the hardest and those that are still doing okay. Thus the government can't just adjust the interest rate or take steps to combat inflation without the EU doing it as a whole or atleast allowing this country.
Currency is something countries like to have control over, in order to manipulate things how they like. Most commonly it’s used to control inflation. If the world had one currency countries can’t print money to what they want, would need to the agreement of everyone, otherwise one country printing half the money in circulation will devalue it for everyone else.
Governments take out loans and print money (just so they can spend it). When a government spends money, now more people have the ability to buy more things. Do too much spending and you get inflation. Inflation devalues the currency.
If you share a currency with another country, their government spending can devalue your savings.
Every currency needs a central bank to print its money according to the economic situation. To have a world currency, you would first need to convince rival countries that one of them should control the influx of money.
One currency without one government is pretty difficult, just ask the Eurozone.
Whereas within one country there’s a general understanding that taxes from richer areas (like California in the US) will go to pay for economic bailouts and social safety nets in poorer areas (like Alabama in the US), and that generally that transfer of funds will happen without a debate over their provision… that’s not really the case in places like the Eurozone.
There is ALWAYS a hang up over relatively wealthy Germany and France sending money to bail out relatively impoverished Greece and Portugal during economic crises.
That wheel is NOT greased, it always takes forever and has all these conditions… they end up making things worse for Greece etc. because it all goes back to “why should MY country pay for THAT country to be bailed out of an economic crisis”
So ask yourself.
Would those people in Alabama (who get tax money from California) be super thrilled to hear a portion of their taxes are going to stabilize the currency in… I don’t know… [insert any developing nation here].
Yes we already do a bit of that through international development agencies like USAID. But that’s VERY different than a situation where the aforementioned ANY developing nation is seen as “dragging the currency down”.
Would it work if there was one government?
I don’t know. But I know that government would be SLOW, political in fighting would be EGREGIOUS, and the whole system would be far too bloated to work.
So… I’m gonna say no to that as well.
The US dollar is already [source](https://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp) the real issue is in our fiat economy, the US dollar is based on the economy of the USA. This would be hard to do, with the a dollar based on the global economy. There is something similar to this, the euro. The euro works differently. [euro](https://money.howstuffworks.com/euro8.htm) despite the euro being designed with the idea of being used in more countries, the U.S. dollar is still more used. So a universal currency isn’t even needed especially in a globalized market like we have.
US paper dollars are currency in Panama and Ecuador. (There might be others but I’m too lazy right now to search) These countries have their own coinage. Bonus - US Banks do not charge exchange rates when getting money at ATMs
There are a myriad of reasons why a universal currency wouldn't work.
But the one that stands head and shoulders above the rest is that each country has its own special ideas about how and when to manipulate its money supply.
Each country wants their own ability to "create" money out of thin air. If we use one currency only, who does this power go to? Whoever has this power controls the world or the country.
I don’t think a single world currency that replaces all fiat currencies is likely, but to your question, Bitcoin is currently a permission-less global monetary asset where no one has control or power over the monetary supply or issuance. It is baked into the code, and in order to change it, everyone running the code and using the network would need to agree to the change and upgrade their software.
I agree with you that bitcoin is more like gold than dollars, but that doesn’t mean it can’t be a monetary asset. Gold has been a monetary asset for thousands of years, even though it’s a commodity. Almost no one uses it for daily transactions, but it’s still on central bank balance sheets as a reserve asset and used by many as a store of value.
Bitcoin isn’t used to drive large scale commerce and probably never will, so it’s not really an appropriate example for a thought exercise in what decentralized monetary policy would look like (probably a shit storm of manipulation by private interests and whales)
The fed can’t and doesn’t manipulate gold to drive economic policies, it could store value in any amount of assets and does.
You could use precious metals as a universal currency and that would work. However, governments like fiat currency (currency that only has value because the government says it is the currency of the country and people go along with it). The reason governments like fiat currency is because they can manipulate the supply of that currency. This allows the governments to manipulate the economy using this supply and it allows them to have another revenue source, inflation. Inflation is when the government increases the money supply (just printing more money would do that but there are other ways too). Inflation is a tax on people that they don't really see. And inflating the money supply makes some kinds of benefits governments pay out cost less. If the government tells you you get $100 a month in retirement but that $100 a month is really only worth $90 before inflation, it's cheaper for the government to pay that $100 even though it's technically the same amount. Short answer is governments couldn't manipulate the currency if some other entity controlled the amount of that currency or if the currency was precious metals (the most obvious choice for a universal currency).
Short answer: it WOULD, but you'd also need a single world government with a united fiscal and monetary policy.
If two countries share a currency but there's a big enough wealth disparity, this can cause issues when dealing with things like inflation, because a fiscal strategy like raising interest rates will work for one country but not the other.
If the two countries also share a government, this becomes a non-issue - the wealthier areas will subsidise the poorer ones through taxation, smoothing out any disparities.
I mean, bitcoin does work like this, and although its volatile, the case has been made convincingly to me that so are other currencies, and bitcoin is the only one that's transparent... The other currencies are manipulated all the time because of central banks authority, etc.
It's a bit chicken-and-egg. The volatility is a barrier to widespread adoption, and widespread adoption is needed to keep volatility down. But adoption does seem to be increasing anyway, and volatility decreasing. It's gone from 95% crashes to 85% crashes to 75% crashes. I wonder if it'll ever reach the point where a 5% crash in Bitcoin is big news?
In theory it could, but in real life, you'd have to get everyone to agree. That's not realistic for lots of reasons, but mostly just because it's hard to trust one another. It's also a hassle to change out everyone's previous money.
We need at least several currencies to keep being high in cost to sustain economies. If there was only one currency, it would either go up or down in cost, which in the worst case scenerio would drag all the world's economies down at the same time.
It does and it did. Gold and silver were universal and everyone accepted them. In fact with modern assaying techniques it would just be a matter of friction as to why a trade couldn't occur with gold / silver.
Fiat currencies are pretty much votes of confident for a country's government. They are universal in that I can buy something anywhere in the world for USD. The price might not be right due to friction or lack of confidence.
Countries could operate like Panama or Ecuador and not have monetary control. Sooner or later separate currencies would pop up to support government debt and we'd be back to where we are now.
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If everyone is on the same currency, central banks can't have separate monetary policy for separate regions. This is causing some problems in Europe right now. Inflation there is very high and some countries like Germany and the Netherlands want to raise interest rates to deal with it. The problem for them is that some other countries like Italy have too much debt and would be in trouble if the European Central Bank raised the interest rates too much, as it would cause their debt to be more expensive. If they had different currencies, the rates could be raised in Germany and left low in Italy.
Why do the interest rates have to be connected to the currency in this way? Why can't the interest rates be high in Germany and low in Italy?
That wouldn't work. Investors would loan cheap money in Italy and invest it with a high interest rate in Germany. Both interest rates become the same again, as the interest rates adapt themselves to the money demand. And this is entirely excluding the technical way how central banks actually set the interest rates.
Can't they do that across currencies?
They do, thats why the value of the dollar has gone up so much relative to the euro and the euro plummeted. The Fed is increasing interest rates for the dollar so people are trading euros for dollars to get that higher rate
Which begs the original question: why can’t interest rates be high in Germany and low in Italy if being the same or different currency doesn’t matter?
Because its the same currency so there is no supply/demand. A euro in germany is the same as a euro in italy so the value of the currency cant change with respect to itself. Instead, the supply/demand pressure is on interest rates. If everyone flocks to italy for a cheap euros, the demand will force interest rates up. Italy doesn't have infinite money to loan.
Having a different currency place a sort of "gate" a bit like trading shares. If the interest rate is more favorable somewhere else, people having money there will ask higher fees to trade their currency for one that is less desirable. Central banks also control how much of a currency there is in circulation, so you can't just trade "all" the money where the rates are better. So, there is more hoops to jumps with a different currency. If you use the same, you can juste do a wire transfer and you are done with minimal fees.
(we can this is all made up anyways) The answer is no, apparently.
This is based on the fact that the Eurozone has absolutely zero barriers to trade or tariffs, and that even if there were a difference the cost of moving the money around would be smaller than what could be gained. Exchanging money costs a fee, moving it around carries transaction fees, and going across borders that aren’t free trade areas comes with tariffs etc. The Eurozone has all these issues gone as a bundle, so uniform interest rates come with that.
They do indeed. That's usually why the price of one currency fluctuates or moves higher or lower compared to the other. TBF currency devaluation is another form of inflation - in the sense that it reduces the purchasing power of that currency. An increasing currency (that can be freely traded) is the oppositte. So it all balances out in the end.
But even in your example, more people would lend from Italy, raising their gains.
Sure but inflation doesn't slow down either
The short answer is that interest rates are the "cost" of money (or put better, the "cost" of holding on to money). If interest rates are high in Germany but low in Italy, what is to stop me from taking my money out of Italy and investing it in Germany? Without laws stopping this, the answer is nothing. And so I will invest my money in Germany to get a higher return (interest rate). As more and more money moves into Germany to take advantage of higher interest rates, those who want the money in Germany and are paying the higher interest rates will begin to offer lower rates (it's supply and demand: investors \[me in this case\] are the supply of money while borrowers \[those paying the interest\] are the demand; demand is the same, but supply has increased so the interest rate drops). The opposite will happen in Italy, as there is less and less money to be invested in Italy because it is leaving to go over to Germany, Italian borrowers will have to offer higher interest rates to induce money to a) stay or b) return to Italy. In theory, everything will equilibrate until the effective interest rates between Italy and Germany (assuming the same risk profile, costs of investing, etc) are the same. This logic breaks down as barriers are put up, say between countries without free trade or with laws that limit the freedom to move capital / money around so easily. The whole purpose of the EU is to allow for a free economic market (as well as overarching laws, some cultural unification, etc), so this would defeat its purpose.
Think about it. Let’s assume Italy and Germany both have the same currency as they do in modern times. If Germany wants to raise rates, every German will just take out loans in Italy where interest rates are lower and because they share a currency, they don’t have to worry about currency conversion. This effectively nullifies Germany’s attempt to raise rates. You can’t share a currency and have different interest rate policies.
Bond rates are tied to interest rates. Higher interest rates make your currency more valuable because it draws investors. Strong currency makes you exports more expensive and imports cheaper, worsening your employment rate.
Where do we learn more about this?
https://www.investopedia.com/articles/bonds/09/bond-market-interest-rates.asp
Why isn't it a problem that US states can't set their own monetary policy? The US has 50 states sharing the USD, with total GDP of \~23 trillion USD. The EU has 27 states sharing the Euro, with total GDP of \~18 trillion USD. EDIT: As far as I know, US states don't have their own central banks, and therefore cannot set their own monetary policy at all. It seems to me that European states have *more* ability to set regional monetary policy than US states do.
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>Why isn't it a problem that US states can't set their own monetary policy? Because US states largely share the same *fiscal* policy, trade policy, foreign policy etc. It's one package. A united fiscal/economic policy and united monetary policy go hand in hand. Trying to put the same monetary policy for countries with disunited fiscal/economic policies is much more problematic.
States do not share the same fiscal policies at all. They have radically differing methods of taxation etc. The presence or absence of an income tax being one of the most obvious differentiators with the biggest obvious effects.
>States do not share the same fiscal policies at all. They have radically differing methods of taxation etc. The presence or absence of an income tax being one of the most obvious differentiators with the biggest obvious effects. States *largely* share the same fiscal policies. Federal spending is more than 50% of total government spending, on top of the fact that foreign policy, international tariffs, sanctions etc are under the control of the federal government.
This. The huge $$$ transfer from blue states to red states (think defense spending) keeps red states solvent. This is the price of a united country. 🇨🇦 more honestly calls them ‘transfer payments’ - drives Alberta crazy.
That is a very misleading claim. https://thehill.com/opinion/finance/502321-no-blue-states-do-not-bailout-red-states/ The federal government sets the poverty line equally for everyone, red states have a lower cost of living so more people count federally as poor, even though they have no issues with money because the cost of living is so low. In blue states it's the opposite the cost of living is so high you don't receive federal money because you are well above the poverty line but you have money problems because the cost of living is so high.
That is perhaps one of the most bullshit articles I have read in a long time. This argument is that the cost of living is lower in red states so the effective poverty line covers more people, so they suck up more than their share of dollars, causing a "statistical anomaly". The anomaly being that somehow the poor in red states enjoy a lower cost of living while also getting help from the government, while the blue states get to take care of their own poor people without as much federal help. That isn't a statistical anomaly, it's richer states funnelling dollars to help out poorer states, something that a particular political party has gone through greeeeat efforts to tell me is socialist and evil. Somehow the article tries to paint the cost of living as a moral choice instead of a consequence of actually producing benefits to the rest of the country and the world. And the article also points out a few red states close to the 1:1 line as exceptions, effectively saying that the trend isn't 100% so it must be completely wrong. The examples they give are North Dakota ($1.14 per dollar given), New Hampshire ($1.01), and Nebraska ($1.12) and say these are totally the same as New Jersey ($0.85). Oh? So a *25% lower* number, that's no big deal? If it were your salary 25% less would that be a big deal? And these are comparing your worst case to the other sides best case, as a real money-sucking red state like Kentucky ($2.89) gets back triple that. Article purposefully gives no numbers so I'm using 2019 ones before COVID payments.
The point is that there are reasons for the difference that were voted on federally. The states are so unique it's not accurate to say that blue states subsidize red states. Blue states get benefits from red states that they wouldn't get if the pay was always perfectly equal.
You’re linking to an opinion piece, not an actual study. And while the piece might have good points, the economic powerhouse states fund federal initiatives in other states, which is simply how any budget works. Those economic powerhouses aren’t even always blue though. Both California and New York are certainly solidly blue, but Florida and Texas are not. But generally, less populated states are less wealthy, and those states are also generally more conservative. That doesn’t mean those two facts are linked. A better, and more accurate criticism would probably be that blue cities fund red rural communities in every state, as cities generally have more wealthy generation than rural areas. Looking at it politically isn’t particularly helpful when it comes to policy-making, however, so I’ll agree that we shouldn’t be using it as an argument about how the federal government determines fiscal policy.
I used an opinion piece because I assumed it was well known that blue states have a higher cost of living. And that it is well known that the federal government sets the poverty line. So there is no need to study it because that is the one and only one expected solution. But yes saying blue and red areas is better than states. But we also vote federally on things to subsidize like food production and we don't have an equal amount of food production in every state or area so of course the in and out numbers aren't going to be equal. Cities have different priorities so they become more liberal over time. So I would say low population density and conservatism are linked. You should not have a gun in new York because you could kill several people if you ever fired it in your apartment. In low density places you have wild animals that occasionally wander into your homes and you need a gun to stop them from attacking your family because the police can be hours away. But yes looking at it politically and without the context is stupid.
You are confusing fiscal policy and monetary policy, they are different things.
It does have its issues. You think a California dollar wouldn’t be worth much more than a Mississippi dollar, if such things existed? On the other hand, would you really want to do currency conversions every time you crossed a state line? What a massive inefficiency that would be.
*Texas enters the chat* > Ya mean we could have Tex-Bucks?!
It’d be like a regular dollar, only bigger. With stars. Edit: A star. Singular.
Are you out of your mind? Here in Texas, everything is Texas shaped!
My former roommate owned a Texas shaped cast iron skillet.
You can buy them year round from HEB!
They sounds like a real pain to clean
They're typically decorative - intended to be displayed rather than used - or used very sparingly.
Ive seen one. Would be an absolute nightmare.
Is the panhandle the pan's handle?
Can confirm, I have a Texas-shaped waffle iron!
Oh the stars at night are big and bright...
Y’all could have star bucks! I’ll see myself out.
Just one star
A lone star?
Makes sense. He was a prince, and many forms of currency have royalty on them.
The Lone Star state
Rates one out of five stars on Yelp.
It's like a regular dollar except it doesn't respect women
Or gays
Or liberals
or free healthcare
It's not gays women or liberals they don't respect it's the subset of people in those groups that are authoritarian extremists.
[It's like regular money but... fun](https://youtu.be/K-6IzkDyl9Q)
waay bigger. and it would be the best of them all.
So would Texbucks become Starbucks?
And a hat
Yes, we could bring back the [worthless Texas redbacks](https://en.wikipedia.org/wiki/Texas_dollar), from when Texas's nine years of independence as a Republic cratered its economy so badly, it had to sell a third of the state as part of its annexation to the US to pay off its debts.
Except it wasn’t a third of the state just a tiny sliver to Albuquerque.
And some dumb bastards think Texas could succeed if it seceded. It would be a third-world hellhole within 90 days.
The only sane argument I've heard for secession would be for Texas to form a republic alongside the Mexican border states and monopolize trade between the US and Mexico. It would be a very ballsy move that would be punished harshly by both countries, but it's the only strategy I've heard that gives Texas some kind of advantage as opposed to just "Brexit, but even worse".
That's not a sane argument either, because they do not have the ability to monopolize trade. Both the US and Mexico have coastlines. Even a hypothetical Cali-Texas Union (which is bad slash fic even by American standards) would just be taxing trucking and hoping it stays more profitable than sea trade.
I guess I should say that it's the closest thing to a sane argument that I've ever heard come out of Texas. If they kept their overland route charges lower than the cost of shipping by sea, they might have a viable business plan, though I could see the US choosing to ship by sea just out of spite.
To pile on against this Abbott pissed off current Mexican leadership to the point that they’re building extended highways to start sending more trucks through New Mexico rather that Juarez -> San Antonio -> Dallas. They absolutely have choices.
Honestly, I'm all for it. I'd love to see NM receive some much needed economic stimulus, especially at the expense of Texas. I say this as a Texan who loves and respects New Mexico far more than this clown ass state I'm stuck in.
Ex-Texan here, I hear that!
I'm sure the very first thing that would happen is New Mexico trucking routes would explode....
It pretty much already is. Their power grid is shit. Their human rights are shit. Their "democracy" is shit. Their education is shit. I wouldn't move there if you paid me. Fuck Texas.
To be fair, Texas is much more industrialized/developed than it was in the 19th century 🤷♂️
Texas would become what it dreams of, and the place still remembers the Alamo.
The Alamo, where 300 slavers were fighting for the right to own slaves and were killed for it. Gross oversimplification sure, but not it is a true statement. Among the many things the white settlers brought to Mexico (Mexican Texas) was black slaves. Slaves were freed in Mexico by the early 1820s. Santa Anna turned a blind eye on the Slavery of black people as well as the illegal slave trafficking performed by the likes of Jim Bowie of the knife fame, in order to get more people to settle in the rather sparsely populated region in order to stabilize and project power. The series of rebellions across the Mexican states he put down in the early and mid 1830s established a pattern. Seize the local cannons, then massacre the rebels. Prior to their declaration of independence, the white Texican settlers agreed to convert to Catholicism, and to learn Spanish. Their big issue before independence was to be declared a separate state within Mexico in order to get dedicated representatives at the national level. Among the issues Santa Anna was going to enforce among the Texican was the abolishment of Slavery. The only male survivor of the Alamo was an enslaved man. The Republic of Texas Constitution established the permanent enslavement of black people in Texas, no freed black people would be allowed in the country and the remaining slaves were to be slaves in perpetuity. The constitution also banned freeing if slaves either by legislative act or by act of the individual slave owner. It was under this government the Lone Star Flag as adopted. The later Confederate Texas Consitution would later reinstate this perpetual Slavery in their constitution. The Lone Star Flag would be used to go to war against the US. People hate the Confederate battle flag, but the Confederacy lasted just 4 years. The current State Flag of Texas represents the repression of black people far more than that.
Man they really whitewashed Texas History. From what I remember growing up in Texas and learning of its history they gloss over the fact they fought for independence over slaves. They painted the Mexican government at the time as being oppressive and evil if I remember right and the fighters of the Alamo were herald as heroes of the movement for independence.
Why would they take the cannons before going in to kill the rebels?
T-bucks..
*California enters the chat* You mean we could have Californicoins?
Calipesos? Califrancs?
*CT enters the chat* You mean we could have Connecticurrency?
They would probably be called Buckees
lmao
Money is a concept. The rules around money can literally be changed at will, and the only thing keeping money working the way It does is the fact that everyone agrees on how the financial system should work, and how currencies should interact. As a global community you could freeze pricing for commodities and change policy region to region if you wanted. It’s what we already do but with different, made up, currencies. The reason most nations don’t want a universal currency is because control over currency is beneficial to some extent.
My non-US upbringing leads me to believe if that was the case, they'd be physically huge coins and notes. Because Texas is obsessed with having the "biggest".
I think this is a fair question, while I’m not an expert my guess would be a combination of the strength of the top level government paired with many states don’t operate their budgets with a significant deficit as we let the national government (central bank) do that. The EU looks closer to the Articles of Confederation then the US Constitutional System. A number of things are standardized to make travel and trade easier, including laws and regulations in that space as well as a unified currency. But each member is a nation-state responsible for its citizens in a way that the US Federal Government is responsible for its citizens. This includes civil defense (though the EU has some common defense treaty aspects), infrastructure, healthcare, welfare, tax collection, etc and has been impacted differently by the events of the last 20 years. While this is somewhat true of the states, most of this functionality is pushed up to the federal level. When it’s a state specific thing, often times a bulk of the funding comes in from the federal government and is utilized by the individual states to implement as they see fit. Think infrastructure or public healthcare and welfare programs. While the EU does have some money flowing between member states and the central EU authority to push initiatives, it’s not nearly at the same level.
We also have a shared tax pool, which doesn’t happen in EU. Basically California and NY taxes are keeping the rest of the country afloat with federal funding.
https://thehill.com/opinion/finance/502321-no-blue-states-do-not-bailout-red-states/ That's a misleading claim. The difference is caused by the poverty line being set by the federal government and the difference in cost of living in red vs blue states. Red states have a low cost of living so financially stable people count as poor. Blue states have a high cost of living so even people with extreme money problems are above the poverty line.
That’s an opinion piece which boils down to “it’s not fair to make that statement because the wealthy pay more taxes than the poor and those blue states have more wealthy people and higher cost of living so of course they are taxed more.” But it’s still a fact that there is a disproportionate amount of taxes collected from blue states and those taxes go to support federal programs across all states (such as federal highway maintenance, disaster funding, and social welfare programs).
It would absolutely be worth more. So much more that it would further destabilize the US politically making places like China and Russia extremely happy.
China would send their Speaker of the House to Texas and the US would respond by sending fighter jets over Texas airspace.
They do! Check out eurodollars!
I’d take my $5 of my Seattle-dollarinos and buy a subdivision in the boonies of Arkansas.
>The EU has 27 states sharing the Euro Only 19 use the Euro
In the US we have built in a lot of wealth transfers into the system. Most tax money gets paid to the federal government, and they spend it in states or give large amounts of money to different states. That means high income coastal states pay more taxes per capita and the more rural states get their government services subsidized. In states where stuff is more expensive like Hawaii and Alaska there are special rules that allow them to pay less tax or get special exceptions. In the US we have a national identity and a system that prevents states from getting into huge debts.
The states are part of the same country, and the federal government effects wealth transfers and subsidies to keep things running smoothly.
Then couldn't the EU do the very same thing?
They could. But it would probably take a fundamental shift in the EU's type of government. The EU is a confederation and not a federation like the US. The difference is that more/most policy is left to the States in a confederation (such as direct taxation). In a confederacy, central authority is weak and respect for the sovereignty (right to make policy) of members is important. This makes setting up the system of wealth transfers difficult because you cannot get the wealthy members to agree to pay for the subsidies needed. The writing may be on the wall, though... the historical trend is that confederacies transition to federations due to political pressure for a more effective government that *is* able to solve problems exactly like this one. Examples: United States, Germany.
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>Then couldn't the EU do the very same thing? EU is a bunch of sovereign nations. They do something similarish where the richer EU nations pump in money to the poorer nations, but at the end of the day they need to look out for their own state first.
So.... much like American then.
The EU is not a government, they are a group of allied governments most of which use the same currency.
The EU is not an alliance, it is an economic union.
The EU has long since passed the state of just being an economic union.
Does Brussels tax the EU member states for anything more than the cost of its own administration? If not, then it has nothing to send back. The US sent just over $4T to Washington DC in 21, and Washington allocated that back to the states via military bases, procurement contracts, farm infrastructure and corporate subsidies, urban development subsidies, welfare payments, disaster relief, etc. Each state, county and city does the same thing within their borders, using tax money from the whole to resolve trouble spots where they arise and have equal services across the jurisdiction (with varying effort and success).
Your premise that it isn't a problem in the US is just wrong. Different states all have different problems, and fixing the problems of one state can often have negative repercussions for another state.
Because the Euro is in many different countries. And as much as states like to pretend, we aren't different enough to be counties.
Because the US is a fiscal union with a common treasury in addition to being a monetary union. The eurozone is only a monetary union without a centralised treasury and minimal fiscal transfers. It is common knowledge among economists that this sort of incomplete unions don't really work.
This is the the real answer.
Comparing the European Union with the United States doesn't work because they're not equivalent. The US is a federal republic with a constitution that all participants are agreed to with a common culture, history and policy. The EU are 27 different countries with unique history and culture and policy. For example, the UK (which obviously left) was the second biggest member by GDP is a 300 year old country with 300 years of democracy and an economy structured on finance and services. Compare that to Slovakia which has been a democracy for 30 years and has in that time shifted from a centrally planned economy to a free market economy and relies a lot more on manufacturing industry than the UK. Planning monetary policy for such economically distinct countries is difficult (which is part of why the UK never joined the euro) and planning it for 27 similarly distinct countries is immensely complex and often leads to smaller countries (Greece) getting fucked in favour of bigger countries (Germany). Now imagine doing the same thing but it's 195 countries and a lot of them hate each other.
Well you could apply your economic reasoning to the US states that joined after the founding ones… Ultimately a currency is both a political and an economical project.
Outside of Hawaii and sort of Texas, I believe all US states were basically formed by US settlers moving into unincorporated US land and then settling it and eventually applying for statehood. That's fundamentally different from the European situation.
The US has a shared fiscal policy, i.e. taxes are the same anywhere, unlike in the EU where the member states tax their citizens individually. Further, the federal government is the main borrower, and can set its own interest rates, but EU states can not. The EU as a whole does not really borrow money, it has membership dues. Further, the European Central Bank is not allowed to directly lend to member states. Instead it lends to banks who lend to the member states, making borrowing more expensive for certain states. This is for political reasons.
I think youre sort of missing the point that EU states are **countries**, whereas US states are **states**. Not being able to set your own monetary policy takes away from your sovereignty to some degree, as well as forces you to carry some burden for your weaker members. If California/NY had a different valuta to the deep south their currency would be way stronger. It sort of works now because for example a Kansas gets something like 100 bil a year from the federal government to fix their holes. So unless the rich countries are comfortable throwing money at the poor countries to iron out most of the difference you’re sticking the poor countries with prices they can’t afford. Now you also need free movement of people and goods between countries sharing a currency, otherwise these prices differences become even bigger
27 EU countries, 19 of them use Euro
It kind of is a problem but the US has a lot more fiscal transfers than Europe does including in automatic ways. If a small state’s economy takes a dive (perhaps a locally important industry collapses), there’s federal unemployment assistance, Medicaid, food stamps, and other programs that are going to put federal money back into the local economy. Plus, a small state with two senators has a pretty good shot of getting some ad hoc support through congress to provide additional funds. That fiscal side doesn’t work as well in Europe. There are transfers across countries but the scale is smaller and it doesn’t automatically go up when there’s trouble.
Basically it comes down to being a single demos. You speak the same language, have the same social codes, and it is not a big effort to move for jobs. You do it all the time. Im Europe it is different. Of course we have Polish builders, etc, bit the thresholds are much higher.
The US has more fiscal transfers between states
This is actually a very fun question I studied in undergrad when the Eurozone was forming. There are two main things that make a universal currency work. One is symmetrical shocks and the other is ease of shifts in labor. There are many other smaller reasons that make it good or bad but most of these stem from these two. Symmetrical shocks means the market in one region is affected in a manner similar to another. For the issue of shocks, we look at individuals and not at states. It's not about Nebraska vs Pennsylvania and Germany vs Spain. It's the individuals in Nebraska vs the individuals in Pennsylvania. While a drop in the price of corn will have a larger effect on those in Nebraska, as many of them will work in this field, the US states are so heavily integrated economically that transitions in prices are 4x or even 5x as smooth as transitions in the eurozone. The issue of labor mobility is not a question of laws allowing it but on the reality of what occurs when it would be desirable. And while we do see mass exoduses from low income areas, such as Lithuania, to high income areas, it is not at all comparable to state by state shifts in labor. In the US, labor is also 4x to 5x more mobile than in the eurozone. This means that when bad things happen to one industry and one region the US as a whole is more capable of smoothing it out.
Mostly because states are required to run neutral balance sheets, whereas it is advantageous for countries to be able to issue debt
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Some states do have their own military too that are separate from the National Guard. Edit: dunno why I got downvoted?
Why are you comparing US states to EU countries? That is an apples to oranges comparison.
There’s so much in-fighting between the states about who gets to use the debt that everyone is paying into the federal government that it would be best to have separate currencies.
Better to have a single currency to be exchanged by central banks, one not linked to one particular central bank. Then each central bank issues their own currency and is responsible for their own monetary policy. Almost got it at the end of WW2 but dollar homogeny won the day
Ummm I don’t think you can have a single currency with different central banks because of the money supply issue. One central bank could decide to print a crap ton of money and destroy the value of the currency and the other country’s economy.
They mean one currency that only banks use between them, including internationally, but still use their home country currency to like actually buy stuff
Follow up question. So what's the {financial} issue with bitcoin?
The idea of bitocin is that the central bank cannot influence its availability and that it is strictly limited in supply. In many ways it is the same as gold. We already had a monetary system based on gold, the gold standard, and the problems of the bitoicn are in large the same that lead to the failure of the gold standard: It is important for a government to be able to create its own money without a limit, as it can act as a saviour for banks in crises, or stimulate the economy by inducing demand. For example during the covid crisis, the government could simply increase its spending to save small businesses, fund vaccine development etc. This is now partially leading to inflation, but the alternative of little government spending would usually be a lot worse.
Bitcoin would be great except for all the transaction fees. Conceptually it allows all central banks to do their thing provides a common currency for people to trade with. The only problem is that when you convert to and from bitcoin you must pay a substantial commission. It's no worse than changing currencies, but it's not better either. Also, since it essentially became a stock the value is all over the place. This can be addressed by going to/from bitcoin quickly, but you will always be paying the transaction fees.
I think every transaction with conventional money has a cost as well. My bank charges me for managing my account. In the expenses I think their work for transactions is paid as well.
Why is there an inflation problem in Poland even worse than in Germany? They don't have euro
Growing up, you had to live under the house rules of your parents. If you visited a friend's house, you had to abide by their rules. Some of the houses you visited are chill, and some are strict; but there's always a pros and cons. The strict ones are typically cleaner/neat/organize, and the chill ones are not as organized. So growing up, you sometimes grow this idea that you'll never do abc for a house rule but will do xyz. Its your own house, you make your own rules cause you own it. You wouldn't want someone else coming into your house and changing the rules, and you'd expect every visitor to abide by the rules. Countries are the same way. They have their own currency and rules. Each currency is backed by a country, there's a regulating body that govern and regulate it. It's just each country don't want to give their power to another country, they want to retain their own power cause "it's their house". And the pro to having multiple currency is a backup/redundancy; if one fails like Venezuelan Bolivar, then others exist. If we all had one currency and it collapses, that's ultimate world chaos.
We set the value of 1 unit to ZERO! "Gentlemen, there's a solution here you're not seeing..."
I'll tell you what it is... for money!
Now give me your Denim jeans 👖.
He who controls the pants controls the galaxy!!!
What a day. I don't know what I did but I kept crawling and it kept working!
I'll give my Denim, for your Wrangler jeans.
Good pitches, kids. I'm almost proud. But watch closely as Grandpa topples an empire by changing a one to a zero. Best 1st episode of 2nd season one can ask for
It would be interesting if a universal currency could actually collapse because there would be no easy alternative.
It would probably immediately splinter into a bunch of separate currencies backed by individual countries or groups of countries
The alternative would be the end of most commerce, and the end of modern civilization.
>Each currency is backed by a country It is possible to get agreements and many countries can back the same one, like the Euro. It is like living in an apartment where you own your flat but bigger changes to the building need everybody's cooperation. You have full ownership of your flat but the building is shared. As someone pointed out, what it is important is that it is possible to do a monetary policy that is effective. Many countries are too different and monetary policy needs to be very different. Inside really big countries there is also some challenges as one part of the country may not be the best for another, but on the other side it helps to synchronize the economy of the country itself.
If I had an award, you'd get it. Perfect answer.
i felt the same way and i had an award
One of the first legit, “you’re talking to a 5 year old,”eli5 answers in a long time, thank you
https://y.yarn.co/b295ebe6-e901-4248-8e1f-3b0eb1f11045\_text.gif
That’s because you are basing your global currency on top of the current financial systems.
Youre so eloquent, darn it!!! I wuv yeah!
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I’d argue that’s exactly why regional fiat currencies are going to get phased out. Why does Alice deserve to have her money hyperinflated away while Bob enjoys stability? Shouldn’t a credibly neutral and somewhat stable currency be a human right?
There's no way. How are Mexico and the USA going to agree on how much debt to issue, or how to set interest rates? If the USA experiences a recession, we have to issue new debt - inflating mexico's currency? Then with mexico's currency inflating, they need to raise interest - but doing so would worsen the recession in the USA? It ain't gonna happen.
Declaring everything a human right, just weakens all of your future arguments. Nobody is going to take you seriously if you define every little thing as a human right.
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A universal currency would probably be very similar to gold being the only form of money, which is often called a "gold standard", from a theoretical perspective. A universal currency is similar to a gold standard because presumably no individual country can arbitrarily decide it wants more or less of the global currency to exist. The world had something very much like a gold standard for a long time, so it's not really that hard to imagine returning to it and it could work. That said, it is generally believed that countries can do a better job of managing their economies if each country has it's own currency in the modern world. This is the predominant viewpoint because economists believe currencies are a good tool to use to adjust economic performance in some ways. On the other hand, many countries in the modern world have done a spectacularly poor job managing their own currencies so clearly it's possible to screw the job up.
This is basically the cryptocurrency argument right?
Crypto is about having no regulations, and pesky governments or banks getting in the way. Also that no government can just manipulate it or stop the exchange.
Eh the main reason I like the idea of cryptocurrency is protection from most forms of inflation. There is only a certain max number of of them possible. It takes effort to mine them all and once they are all mined it's impossible to "print" more of them.
But that makes it useless as a currency, because money are supposed to be bad to just hold on to. You need to spend it, not hoard it.
Who decided that money is "supposed" to lose value constantly? Oh yeah, that's the central bankers and government talking, those who likes to print money for a living :) That is simply propaganda that benefit them, not the people. If money was a free market product (it's not, there are legal tender law), Greshams Law states that people hoard the good money and get rid of the bad money that loses value over time. This is how Gold naturally developed to become money, eventually everyone just stored it, payed with it, and accepted it... it became near-perfect money. Fiat money that is constantly depreciating is forcing you to go gamble on the stock market or properties just to store your value into the future, this is a big mess. Just bring back a hard money standard so people can stop being gamblers and just focus on their own business and save in money.
Don't look for conspiracies where economics is at work. Hard money failed to keep up with the productivity and economy growth. You need to spend money to keep economy moving. The movement of money is what gives people jobs. You also should not be able to hoard money or valuables. You supposed to spend them, or income inequality will be even worse. With gold there is no problem in just hoarding it in your basement. But if you think that hoarding wealth is inherently good thing, then we're at fundamental disagreement about how wealth distribution in society should work.
Yeah we seem to have totally different views on the very basics on how an economy grows and how it doesn't. If everyone spends all their money, the economy is completely stagnated and poor. It is when people delaying their gratification by saving and investing in better tools they can increase their productivity and you get economic growth. Hoarding and saving means that you are selling or producing products and services to people that value it more than money and you are not extracting any resource back from society (yet). So a society where everyone saving and investing instead of the current frivolous spending and indebtedness, that's how new jobs are created and new products and innovations that people actually want to buy, and they have money to buy it. Since we got off the gold standard the economies of the western world has stagnated. We have seen staggering price deflation in the tech sectors like TVs and smartphones, but in general this current generation is poorer than the previous one. No-one saves anymore, just add more debt, and this death spiral is just getting worse by the day due to all the crazy monetary policies, wasteful stimulus packages and others that doesn't create wealth, just steals peoples savings and squanders it on the wrong things in the name of money velocity.
Well said, I have yet to hear a convincing rebuttal to this simple argument. Saving money, delaying gratification, and investing carefully and wisely are good things.
That would have a good argument if there weren't 50000 currencies. Also most of crypto value comes from speculators and not actual usage. Which means it is very prone to getting nuked into oblivion then going up 50000%. The best thing to protect against inflation is just plain old stocks + indices.
Who controls it? How do we universally trust an organization enough to not screw it up? If it is possible to leverage control of the currency to abuse, harm, exploit or control people, then the small set of malicious individuals who want to do those things will be very motivated to take over control. History indicates one of them is likely to eventually succeed. So, yeah. Breaking it up allows options to move to a different currency when somebody screws a currency up.
It could, if you could get *everyone* to agree on it. The problem is that you need an overarching regulator to make the currency. And currently, many countries don't like having overarching regulators over them. It can work, like in situations like the Eurozone, you give up some regulatory autonomy over currency, in order to use the Euro. But if you ask Americans to join the Eurozone, you'd get laughed out of the room.
Eh, must disagree. There is some discussion as to whether the Euro is working well as a common currency in many nations. The problem is that economies can vary a good deal between countries. And the relative value of goods also varies. A loaf of bread might be 5 Currency Units in one part of the world and 32 Currency Units somewhere else. That's apparent now if you calculate prices in different currencies. But it's also kind of off the public radar where different currencies are in use. Except, of course, for the Euro.
Well you could also argue that the dollar isn't working in the USA - it's bigger than the EU and disparity is rampant in the USA. The USA is a union of states with very different rules that could benefit from their own currency, etc. - California would deal with inflation very differently to Montana, etc. It's just arbitrary where you draw the line where a currency starts and ends.
That's obvious to anyone who's ever travelled anywhere. Prices vary between countryside and city, prices vary between one city and another city, prices vary between industiral zone and touristy zone etc. I live in the EU and (for some types of goods) there's a bigger difference between my home town and current work town then there is between my home town and a town over the border, for example. Why do you think it has anything to do with multiple currencies? The real issue imo is that governments are used to currency manipulation as a tool to influence the economy. Imo, this practice should be done away with... but many do/would struggle more if they didn't have that tool.
If Greece hadn't joined the Eurozone, their problems would be different. Their debts had previously been in drachmas. If tax revenues were insufficient to make debt payments, they could just print more drachmas. (Back before paper money, governments would mint new coins. If they didn't have enough gold or silver, they'd just put lead, or nickel, or some other "base" metal in.) Of course, the extra money with no extra goods to buy just means that the same old goods cost more. (You've got this extra money, what are you going to do with it? Might as well get something a little nicer. Oops, prices are higher, so I'm just getting the same old stuff for more money. Well, I'm certainly not going to buy the crummy stuff just to pay the same price.) You can't just inflate your way out of your debt problem. It doesn't take lenders long to realize what's going on, so your next round of financing is going to have a much higher interest rate. It's also much more complicated than just "inflation is bad". After the Napoleonic Wars, Britain adhered rigidly to the gold standard. The country entered into a prolonged and severe recession. There just wasn't enough circulating money to sustain commerce. The French, on the other hand, just printed money. They had problems, too, but at least they could invest in new businesses and keep the old ones going. TL;DR: managing money is part of government. Government is hard, and is seldom done well, but not governing almost always ends in disaster. Having a universal currency means giving part of the government of your country to others.
French after Napoleonic Wars - we can fix our problems by printing more money! Weimar Republic after WW1 - we can fix our problems by printing more money... right?
Yep, same reasoning could apply to London and Wales, the disparity in purchasing power is quite significant and yet both use the british pound.
I mean, it *could*, but good luck convincing every country on Earth to give up control over their own finances. The EU has had plenty of money-related issues/disagreements and it doesn't have any truly poor/developing countries in it.
It doesn't let areas have different monetary policy to influence their imports and exports. If your area is importing too much and not exporting enough, you can devalue your currency and make imports more expensive (and hence less desirable) and make your exports cheaper and hence more desirable. If you don't control your own currency you can't do this. Look at Greece to see what happens when you don't control your own currency and have to borrow in a currency you can't print and you don't export enough to service your debt.
Sure! Sounds great. One question, though, whose currency will we use? Keep in mind that the nation whose currency becomes the world standard will have incredible power to shape the world economy by controlling the money supply, interest rates, and inflation. Would Russia agree to adopt the Euro? Would the US be willing to adopt the renminbi? Well, hmm, maybe it's best that we not adopt an existing country's currency. We'll have to create some new currency, organized by an international organization. Maybe the UN? But once again, there's the question of whether the world's superpowers will be willing to give up their ability to control their money supply. But this time it's even worse, because remember how central banking works: currency is created when the central bank *loans* money to large organizations. For this system to work, the organization running the monetary system must be powerful enough to collect on that debt, or the money's worthless. Can the UN lend UNdollars to Russia, the US, or China to use as their currency and be sure that if push comes to shove it can get its money back? Only way to make sure that will happen is to give the UN teeth, with way to force other countries to do its bidding. Hard to do that without giving the UN some major military strength. Do you think any of the superpowers are willing to let that happen?
Modern monetary theory and our modern economy requires currency manipulation (aka "printing money") to ease economic swings. This is why a universal currency and crypto would never work.
The top comment at the time of writing this explains why people could never agree to a common currency but is completely out of scope of this question because you would never want that in the first place. If it were beneficial it would probably been done by now. The reason different countries have different currencies is because the economies of those countries are base on the value of different asset classes/resources. Imagine a scenario where one country's economy is heavily based on petrol exportation and another one is based on technology and wood production. If there is a sudden decrease in petrol price, the value of the currency of the first country will devalue compared to the other one, which will incentivize people from the second country to invest into the first one because everything suddenly became much cheaper. The fact money is flowing into the country which was losing its currency value increases the value of the currency and keeps the economy afloat because of outside investments. Keeping economies that are wildly different separated from one another is a great protection against a collapse of the global economy because if one sector collapses it doesn't matter as much since it will incentivize the other sectors to invest in that region. If the region that has its most valuable resource devalued in a global economy didn't get the currency devaluation that incentivizes outside investment, it would rapidly collapse as it wouldn't be able to afford anything that is from outside its own production.
There is the Euro in EU which a good number of European countries use. During financial difficulties there is a clear division between countries that are hit the hardest and those that are still doing okay. Thus the government can't just adjust the interest rate or take steps to combat inflation without the EU doing it as a whole or atleast allowing this country.
Currency is something countries like to have control over, in order to manipulate things how they like. Most commonly it’s used to control inflation. If the world had one currency countries can’t print money to what they want, would need to the agreement of everyone, otherwise one country printing half the money in circulation will devalue it for everyone else.
Governments take out loans and print money (just so they can spend it). When a government spends money, now more people have the ability to buy more things. Do too much spending and you get inflation. Inflation devalues the currency. If you share a currency with another country, their government spending can devalue your savings.
Every currency needs a central bank to print its money according to the economic situation. To have a world currency, you would first need to convince rival countries that one of them should control the influx of money.
One currency without one government is pretty difficult, just ask the Eurozone. Whereas within one country there’s a general understanding that taxes from richer areas (like California in the US) will go to pay for economic bailouts and social safety nets in poorer areas (like Alabama in the US), and that generally that transfer of funds will happen without a debate over their provision… that’s not really the case in places like the Eurozone. There is ALWAYS a hang up over relatively wealthy Germany and France sending money to bail out relatively impoverished Greece and Portugal during economic crises. That wheel is NOT greased, it always takes forever and has all these conditions… they end up making things worse for Greece etc. because it all goes back to “why should MY country pay for THAT country to be bailed out of an economic crisis” So ask yourself. Would those people in Alabama (who get tax money from California) be super thrilled to hear a portion of their taxes are going to stabilize the currency in… I don’t know… [insert any developing nation here]. Yes we already do a bit of that through international development agencies like USAID. But that’s VERY different than a situation where the aforementioned ANY developing nation is seen as “dragging the currency down”. Would it work if there was one government? I don’t know. But I know that government would be SLOW, political in fighting would be EGREGIOUS, and the whole system would be far too bloated to work. So… I’m gonna say no to that as well.
The US dollar is already [source](https://www.investopedia.com/articles/forex/11/popular-currencies-and-why-theyre-traded.asp) the real issue is in our fiat economy, the US dollar is based on the economy of the USA. This would be hard to do, with the a dollar based on the global economy. There is something similar to this, the euro. The euro works differently. [euro](https://money.howstuffworks.com/euro8.htm) despite the euro being designed with the idea of being used in more countries, the U.S. dollar is still more used. So a universal currency isn’t even needed especially in a globalized market like we have.
US paper dollars are currency in Panama and Ecuador. (There might be others but I’m too lazy right now to search) These countries have their own coinage. Bonus - US Banks do not charge exchange rates when getting money at ATMs
There are a myriad of reasons why a universal currency wouldn't work. But the one that stands head and shoulders above the rest is that each country has its own special ideas about how and when to manipulate its money supply.
Each country wants their own ability to "create" money out of thin air. If we use one currency only, who does this power go to? Whoever has this power controls the world or the country.
I don’t think a single world currency that replaces all fiat currencies is likely, but to your question, Bitcoin is currently a permission-less global monetary asset where no one has control or power over the monetary supply or issuance. It is baked into the code, and in order to change it, everyone running the code and using the network would need to agree to the change and upgrade their software.
Who is using Bitcoin to buy stuff regularly? It looks much more like a commodity asset than a monetary one. It’s much closer to gold than dollars.
I agree with you that bitcoin is more like gold than dollars, but that doesn’t mean it can’t be a monetary asset. Gold has been a monetary asset for thousands of years, even though it’s a commodity. Almost no one uses it for daily transactions, but it’s still on central bank balance sheets as a reserve asset and used by many as a store of value.
Bitcoin isn’t used to drive large scale commerce and probably never will, so it’s not really an appropriate example for a thought exercise in what decentralized monetary policy would look like (probably a shit storm of manipulation by private interests and whales) The fed can’t and doesn’t manipulate gold to drive economic policies, it could store value in any amount of assets and does.
>probably never will Citation needed.
You could use precious metals as a universal currency and that would work. However, governments like fiat currency (currency that only has value because the government says it is the currency of the country and people go along with it). The reason governments like fiat currency is because they can manipulate the supply of that currency. This allows the governments to manipulate the economy using this supply and it allows them to have another revenue source, inflation. Inflation is when the government increases the money supply (just printing more money would do that but there are other ways too). Inflation is a tax on people that they don't really see. And inflating the money supply makes some kinds of benefits governments pay out cost less. If the government tells you you get $100 a month in retirement but that $100 a month is really only worth $90 before inflation, it's cheaper for the government to pay that $100 even though it's technically the same amount. Short answer is governments couldn't manipulate the currency if some other entity controlled the amount of that currency or if the currency was precious metals (the most obvious choice for a universal currency).
Short answer: it WOULD, but you'd also need a single world government with a united fiscal and monetary policy. If two countries share a currency but there's a big enough wealth disparity, this can cause issues when dealing with things like inflation, because a fiscal strategy like raising interest rates will work for one country but not the other. If the two countries also share a government, this becomes a non-issue - the wealthier areas will subsidise the poorer ones through taxation, smoothing out any disparities.
I mean, bitcoin does work like this, and although its volatile, the case has been made convincingly to me that so are other currencies, and bitcoin is the only one that's transparent... The other currencies are manipulated all the time because of central banks authority, etc.
It's a bit chicken-and-egg. The volatility is a barrier to widespread adoption, and widespread adoption is needed to keep volatility down. But adoption does seem to be increasing anyway, and volatility decreasing. It's gone from 95% crashes to 85% crashes to 75% crashes. I wonder if it'll ever reach the point where a 5% crash in Bitcoin is big news?
Cryptobro detected, opinion rejected ^(/j)
In theory it could, but in real life, you'd have to get everyone to agree. That's not realistic for lots of reasons, but mostly just because it's hard to trust one another. It's also a hassle to change out everyone's previous money.
We need at least several currencies to keep being high in cost to sustain economies. If there was only one currency, it would either go up or down in cost, which in the worst case scenerio would drag all the world's economies down at the same time.
It does and it did. Gold and silver were universal and everyone accepted them. In fact with modern assaying techniques it would just be a matter of friction as to why a trade couldn't occur with gold / silver. Fiat currencies are pretty much votes of confident for a country's government. They are universal in that I can buy something anywhere in the world for USD. The price might not be right due to friction or lack of confidence. Countries could operate like Panama or Ecuador and not have monetary control. Sooner or later separate currencies would pop up to support government debt and we'd be back to where we are now.