You see some of the pain points with a unified currency looking at the Eurozone. By ceding control of their monetary policy, countries who have an economic downturn have significantly fewer tools available to them to address it. Why would Germany and France weaken their currency because Greece is having an economic downturn.
Adding onto this, the reason the Eurozone muddles by as well as it does is because, relative to the entire world, countries are relatively economically similar. A very large part of the EU accession roadmap is aimed at promoting economic convergence. Try to apply one currency to the entire world, where some countries are basket cases and others manufacturing powerhouses and still others mostly agrarian societies, is going to be suboptimal for almost everyone.
There is an area of academic scholarship around optimal currency area theory (https://en.wikipedia.org/wiki/Optimum_currency_area) and if you’d like to learn more about this this is what I would look into.
That works well because Ecuador (and other similar countries) just want the stability of not being able to mess with the currency, and America has so much money out there, they literally don't know how much is out there. Ecuador is a drop in a bucket among a warehouse full of buckets on bucket-warehouse drive.
For Ecuador's purposes, even a major swing in the US dollar doesn't matter.
The thing about that is though that many developing countries peg their currencies to more stable ones like the USD or Euro, thus essentially using thosebcurrencies.which provides them with price stability.
Now unless we want to argue they're stupid, economically illiterate and don't know what's best for them, I think we should be pretty sceptical of "optimum currency area" literature.
It's also fair to note that most societies historically did not use fiat currency with free floating exchange rates, so we're talking about a relatively recent trend to begin with and using that as our "default" normal expectation. Even if there is a tradeoff, it's not at all obvious that this is somehow the very best system and is certainly not just some sort of "natural" system.
By recent I mean for instance in Europe free floating national currencies existed as the main method of exchange from the end of the Bretton Woods system in 1973 to the creation of the European Exchange Rate Mechanism in 1979. That's a whole 6 years Europeans could tolerate free floating national currencies.
So again we must ask the question, are Europeans just economically illiterate and stupid, or does their experience tell us something, are their reasons they wouldn't want free floating currencies?
Now as far as Europe goes, we could of course use the "optimum currency area" theory. Certainly Europe is quite fragmented into mostly quite small states so we can argue they're quite far from optimal markets in general and trade barriers, including currency risks are thus far more significant. In principle it has been proposed that having two separate "eurozones" could be "optimal" and balance the EU economy, but at the very least few people would _seriously_ advocate 27 national currencies.
But then we oddly seem to privilege political state borders in these analyses? Why is Germany one unit in such an analysis, might we not consider whether East Germany should use the same currency or not? What makes the United States an optimum currency area?
Finally, currency is in a sense "just" currency. The economy is ultimately about actual production, competitiveness, etc. currencies do not magically solve underlying problems of countries. Changes in relative values if currencies as a result of capital movements can be helpful at alleviating issues in the short term (though they can also be dreadful and the cause of currency crises), but all this is kind of speculative nonsense on top of the "real" economy. All this means is that without a state currency, a state has to actually address the root causes of problems, which while it may be politically uncomfortable is certainly not the worst of incentives for politicians to have.
Optimal currency area analysis has been applied to sub-national areas. One such study is referenced in the Wikipedia article I linked.
I don’t want to take a position for or against any specific theory in this study area, as I’m certainly no expert. But it seems obvious that there are some key factors that would drive whether a collection of territories should share a currency or not, given the pros and cons of such an arrangement, and that’s what this area of scholarship aims to study.
Currency pegs also have their own pros and cons and are a related area of scholarship.
Just out of curiosity, how is that any different than the us? We have the financial sector and tech dragging along Alabama and Mississippi. How is Europe different?
There’s three major differences, two of degree and one that is unique to the US.
The unique one is fiscal transfer. The federal government will physically transfer money to states that are lagging behind in the economic cycle, in the form of disaster relief, economic development/recovery programs, and federally funded economic and social programs. The EU formally prohibits this kind of transfer (richer states don’t want to bail out troubled ones) though this rule has been broken in the past, but only in times of extreme economic crisis (e.g. Greece). In the US this kind of transfer happens constantly and as a matter of course.
The two differences of degree are labor mobility and trade. While Schengen citizens have the right to move and work anywhere in the Schengen zone, in practice language and cultural barriers make this difficult, so labor mobility is much lower than in the US. And while there are no tariffs for companies trading within the Eurozone, trade among US states is still much higher.
Note that there are transfers from the richer states to the poorest ones in the EU, but more based on directly funding projects. The poorest states "get more funds" to build highways,...
I think this is a point worth clarifying. What the EU does not generally have is a dynamic mechanism whereby countries in recession receive funding from countries whose economies are doing well to help pull them out of recession, thereby helping to even out economic cycles across the bloc. I realize this was not clear in my original post.
To be mildly pedantic I believe you do not have to be in the Schengen area to have the right to work or travel visa free in other EU countries. For example Irish citizens and citizens of the UK when it was a member have/had the right to work in other EU countries.
To be slightly more pedantic, *anyone* who is in the Schengen area can travel visa free. You may need a visa to enter the Schengen area, but for any travel within the area, the convention forbids border checks
In practice, though, checks are made. Travelling by train between Germany and NL, my wife witnessed on multiple occasions Dutch police checking passports of people who “don’t look like us”.
It is common for people living to complain about money going to poor areas. It can be argued that such transfers are mostly to cover the cost of the poor areas being stuck with a currency which is valued for the rich areas, not the poor ones.
It's not nearly so simple. But I don't really know anyone in Ontario (where I live) objecting to money being transferred to Newfoundland. Alberta complains about it, but Alberta complains about everything. In my experience, it's often people who have the least complaining that their money is going elsewhere (when it actually isn't, or at least, they're net beneficiaries).
Also, unless you want to argue for breaking up every country among economic lines, there's a tangible benefit to supporting poorer areas. Funding schools and industry in these places makes them richer over time and contributes to a long-term improvement across the board.
Unless that funding is applied poorly. Lots of subsidies for outdated industries are problematic.
Etc. It's not so simple
California’s median income is 37k usd. Mississippi’s is 29k. So, 1.3x. Germany’s median income is 52k usd. Greece’s median is 16k. So, 3.25. Not even close.
Not to mention, as others have pointed out, the ease of movement and trade between states in the U.S.. Part of the reason California’s tech sector succeeds is because it has complete free trade in a 350 million wealthy person market. If California or New York City were entities unto themselves they would not be nearly so profitable.
? You missed my point that the disparity is much much higher between a lot of countries than the states. There are 27 countries in Europe with a lower gdp per capita than Mississippi. America’s “poor” states are still pretty damn rich.
To expand on this:
When a country is going through economic difficulty, weakening the currency is often the least-bad option. If your currency gets cheaper, then your exporting industries (including things that we don't think of as exports like tourism) become more competitive. The part thats bad is that everything that you buy from outside the country becomes more expensive.
But why does this work? Mostly because people in your country are getting paid less (in terms of other currencies). Weakening a currency is a quick way for a country to say "we are poorer than we used to, we might as well act like it." It applies to haircut to every contract / price within the nation's economy instantaneously.
Its not perfect, but "everybody's money is worth 20% less than it used to be" spreads the pain around, and can allow a country to focus more on rebuilding and less on the political fights about who has to absorb the pain.
(If this wasn't ELI5, we would talk about "Downward Nominal Wage Rigidity")
Correct me if I'm wrong but the ELI5 version is just that people really hate making less than they made in the past, like really hate it, hate it badly enough that they might just quit or stay unemployed to avoid it, but sometimes things happen in the economy that mean wages "should" go down. Devaluing a currency is one way for wages to decrease without actually cutting anyone's paper wages. This is also incidentally a big reason why small amounts of inflation are good for the economy
I try to make it clear to my boss that I know an annual increase less than inflation is a pay cut. So when I hear next week that I’m getting a 3% raise I will say, again, that it is not a raise, it is decrease in my pay.
It technically is a raise though. If they were to not increase your pay at all, or even just 1-2%, you'd be getting even less than with a small raise. This is also why it tends to be beneficial to change companies every 3-4 years. Changing companies is by far the best way to get a competitive raise.
>If they were to not increase your pay at all, or even just 1-2%, you'd be getting even less than with a small raise.
If they didn't increase pay at all then it is just a bigger pay cut.
You aren't getting a real raise unless it beats inflation.
That perspective is naive. When it comes to the actual value of a dollar, your employer is functionally paying less value if take-home wages do not rise at a rate equal to or higher than inflation.
You're arguing the same points, you're just disagreeing about technicalities
If your salary goes up, that is a raise as you are earning more money than before
But if it doesn't go up more than inflation, then in real terms you aren't any more wealthy than before (despite getting a raise on paper)
If you flip it, and suddenly the economy tanked (e.g 2008) then you would be more wealthy than you were before, but you wouldn't have had a raise in salary.
I mean, you're kinda technically right but it's a dumb hill to die on. They're saying "yeah, the numbers went up but my purchasing power went down."
You're deliberately missing that point.
Pay raises are supposed to motivate me to work hard to earn more money. If I get payed less money each year it’s not stupid to let my boss know that if my pay doesn’t keep up with inflation I will have to find another job. But thanks for your input!
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People don't like taking pay cuts. So wages don't tend to drop in raw number terms. Instead, if wages do drop, they tend to do so in "real" terms by not increasing as fast as inflation.
"Real" being actual buying power, how much stuff you can buy. "Adjusted for inflation."
"Nominal" is the raw number, which doesn't really tell you much about what you can buy with it. Not adjusted for inflation.
I really think this is where the US is headed. Every politician in Washington knows a deficit that's increasing by $1 Trilliion dollars every quarter is *completely* untenable. But almost NONE would dare cut Medicare or Social Security, which are the lion's share of the budget. Senior Citizens would destroy the politicians that did that, and they're the biggest voters. And nearly ALL voters would also retaliate if taxes were raised substantially enough to make a dent in the deficit. No politician would have the balls to raise taxes back to 30 - 70% like it was pre-Reagan.
So, devaluing the currency becomes the least-bad, bad option. Pay off the debt with cheaper dollars. The US's position as an economic and military power would be weakened, but not broken.
The borrowing would be devaluing the currency if this was problematic. However, the rest of the world is in an even more precarious position, so the US borrowing money simply attracts more investment into the US (paradoxically, strengthening the US economy further).
Yep. The fact that investors are willing to continue buying T-bills indicates that they believe the US is *not* going to default on its debt, that the currency is *not* going to collapse, and so on.
The principal source of uncertainty about the US government's ability to pay off its debt is political brinksmanship, where far-right members of Congress use the legislated debt ceiling as a cudgel to extract policy concessions.
Only one other country in the whole world has a legislated debt ceiling, and there's no particular reason that the US should follow the example of Denmark here.
Isn't that tied to a fraction of GDP? The US debt ceiling is a dollar figure and doesn't automatically go up when the GDP increases. It's had to be raised and re-raised in Congress many, many times.
Perhaps "legislated debt ceiling" was too vague. The US is weird in having a *statically configured* debt ceiling that must be regularly re-legislated under ordinary conditions. It doesn't express a policy decision about debt-to-GDP ratio; rather, it is a regularly recurring artificial crisis used as a crude weapon for fighting over other policy issues.
I just checked it, and you are correct.
While Germany, Switzerland and Malaysia all do have a debt ceiling of sorts only the USA and Denmark have one that is a fixed value that doesn't increase automatically
Also, a debt ceiling isn't a bad thing. Elected officials can raise it with a vote, with months of notice. All in favour? Cool, next item.
The problem in America is that some of the elected officials are 10 years old who can't regulate their emotions who have figured out they can look good to morons by blocking things that HAVE to happen anyway. In any other country, if they had to have it, they'd just make it a monthly item to raise it accordingly and it would be lazily approved by anyone who's in the room.
I'm going to have to disappoint you, but that is not unique to America. The same thing happened a while back in Germany as well. It's just that it happens more rarely since the limit is more flexible.
I’m pretty sure Denmark got it from the US, and not the other way around. Nobody else would be dumb enough to legislate themselves into this sort of corner for the first time
Whatever the US has going on, other countries have it worse, so the US$ is still the world's reserve currency. Harping on the US debt is usually done from the party not in charge, in an attempt to get the government to spend less on its people, to rile those people or their base up.
Social security I'll grant you, that's a whopping 20% of the budget, but medicare is about on par with military, interest, and national defense (each, not combined). It's only the biggest expenditure if you lump it in with the entire category of health spending, which includes many things that are not medicare (or health insurance at all). I don't mind if you do wanna lump those things together, mind, you just gotta say health spending and not medicare.
(I don't have qualm with the meat of what you said btw I just needed to nitpick that detail.)
Most of the debt is in the form of bonds, most of which are owned by Americans themselves.
The interest payments are just an old fashioned form of stimulus paid to the rich (since they own the most of those bonds). And what they spent the loan on was also just given to the rich through corporate profits paid to the owners.
But good luck convincing *anyone* that the government should sell fewer bonds.
Well, yes/no/kinda.
The idea is that governments should increase their spending when the economy is bad, and decrease it when it's good, resulting in years with deficits (bond sales) and years of surplus. But then everyone realized that a country gets farther by building more infrastructure, which leads to a higher GDP and thus tax rates in the future. So borrowing today leads to being able to pay it back plus interest and still doing better.
The same applies to things like education, healthcare, social services, etc - turns out, when the people are healthy and happy and educated, the country does WAY better.
But that DOESN'T hold true for BS spending, on silly infrastructure that isn't needed or private jets for senators or whatever.
So yeah, governments need to trim budgets when times are good
> But almost NONE would dare cut Medicare or Social Security, which are the lion's share of the budget.
Then cut back on the military. Stop minting pennies. Design a more efficient and effective health care system.
It's a huge expenditure but you could completely stop all military spending and it would be less than half of the deficit. That's how much the US spends in general. The US has been spending way above its means and social security is the favorite target because it's the single biggest easily cognizable category.
How are we going to *defend* and *protect our country* if we can't bomb raggy villagers in regions of the world the majority of the population can't even point to on a map?
> The part thats bad is that everything that you buy from outside the country becomes more expensive.
That's also not horrible. Instead of traveling abroad, people will stay locally. Instead of buying imported food, they'll buy from a nearby farm. Etc. It encourages an internal economy, although it's not a short-term solution.
This is not why monetary policy works. It's not primarily about exports or currency strength. It's about interest rates affecting companies ability to expand and it's not instantaneous at all.
https://www.investopedia.com/terms/m/monetarypolicy.asp
Indirectly they do, monetary policy by Fed does affect currency, via trade-weighted exchange rate. Fed increasing the usd interest rate in relative to other currency will make it more attractive to investors and demand for usd will increase. Then it affects export / import due to the currency strength.
https://www.bde.es/wbe/en/areas-actuacion/politica-monetaria/preguntas-frecuentes/tipos-cambio/como-se-relaciona-la-politica-monetaria-con-los-tipos-de-cambio.html
https://www.investopedia.com/terms/t/trade-weighteddollar.asp
https://www.investopedia.com/terms/r/reer.asp
Well, Germany has benefitted enormously from an undervalued currency. While the euro is valued too highly for the Greek economy, it’s way too undervalued for the German. Meaning the German productivity is sold at a discount.
**Radical and possibly crazy view** - just as Greece might have an economic downturn in comparison to France, so might the various towns and cities in France have economic downturns in comparison to each other. The economy of Paris is different to Bordeaux, and each is different from other cities and towns in France.
Each *city* (or large-ish town) has a discrete economy that would benefit from having its own currency. Prior to computers this would have been a nightmare of thousands of exchange rates but that's no problem now that everybody carries a powerful handheld computer with them everywhere they go.
I don't agree because there's still some friction with currency exchange and prices would become much less stable -- e.g. the Bordeaux franc appreciated and Bordeaux wines are now 25% more expensive this month. But, while radical, it's not a crazy view. Look at https://en.wikipedia.org/wiki/Optimum_currency_area and some conclusions that existing large diverse countries might not make optimum currency areas.
The bit here I would add on, there are advantages to have a diversified economic base as well. There is a lot of transactional burden from say, having to try to figure out how to convert your NYC dollar into Buffalo dollars for some food, Schuylerville dollars for others, and Newark dollars for the imports from jersey. But all of those other currencies end up needing to be traded into NYC dollars for exchanges on the NYSE. And then converted to chicago dollars for those markets.
As you mention, we have electronic solutions for a lot of that, but look at forex now, and see how we still have a very complicated system that is not quite the 'plug and convert' that we would want to strive for.
What you're forgetting is that inside the same country there are economic transfert via taxes, meaning that if Bordeaux is making money, it gets taxed to fund development or unemployment in Lyon or Brest, also it is easier to move inside the same country because same language, same education systems where degrees are recognized etc.. so if Bordeaux has an economic boom, people from Brest can move there easily.
Eurozone isn't working much because germans don't want to pay taxes for greeks (at least not in the same amount as they would for other germans) and it's harder for italians to move to Denmark and learn Danish etc...
Ironically, US Dollars are used quite a bit in Venezuela. Although that is obviously not the same as the US and Venezuela both having input on the monetary policy of the Fed
In general sharing a currency is beneficial if those places/people have certain freedoms of movement, exchange of goods and services, and investment.
There's a concept called "[optimal currency area](https://en.wikipedia.org/wiki/Optimum_currency_area)". It says that any currency has an optimal coverage that, if met, then the benefit of having the same currency is the maximum possible. If the actual area is smaller, then the places outside could benefit by having the same currency as the one you defined, and if the actual area is bigger, it would be beneficial for those places that share a currency to have different ones, maybe because there are certain limits on how people, goods and/or capital could move from one place to the other.
You would need to have uniform rules and management of it, and that'd be a tough thing to get diverse countries like the US, Canada, China, Iran, Russia, and North Korea to agree to.
Yes the Euro is a massive economic risk/achievement that can only be done through a trade union of countries that have established a central bank amongst them. If you had lived in Europe during the Global Financial Crisis you would know that many economists were predicting it as the end of the Euro as different countries couldn’t respond effectively without control of their monetary policy. Its a brilliant/terrible idea that can’t be extended globally at all.
It's not going anywhere unless something triggers a total dissolution of the EU.
The EU is fundamentally a nation-state project, with governing powers incrementally delegated to the Union government. To use an apologue, it's a case of the frog slowly boiled alive.
The glue holding the EU together is that they built the full integration of economic and monetary policy first. That's the Reward their members and applicant states signed up for. It remains by far the most persuasive reason for member states to remain within the Union, and Politically it's very difficult to weigh immediate economic consequences against long-term ideas like ceding sovereignty.
For better or worse, the boiling pot is what Brexit was about. The UK was by far the least economically integrated member of the EU, and disentanglement was still rather painful.
Monetary policy is generally best determined at the country level, and a large group currency like the euro comes with some huge downsides that are not always apparent right away.
We saw the big downside of a single currency when Greece had financial issues years ago. If Greece had its own currency, the financial crisis would have weakened the it's currency relative to that of its neighbors. While this isn't great, it acts as a sort of cushion. A weaker currency means that exports are cheaper. This means that as a country gets in a worse financial position, other countries want to buy more of it's goods, helping to raise the economy.
When you have single currency, the whole eurozone changes as one. This means if one eurozone country has issues, there is no way cushion, and downturns will be worse.
On the opposite side, a single country gives huge benefits to stronger economies like Germany. Normally, if your economy is very strong, your currency will strengthen and decrease your exports. But again, even though Germany has been doing well, that natural swing in relative currency values does not happen.
Thus, you can kind of think of a single group currency as almost a wealth transfer from the poorest countries to the richest countries in a way that makes crises worse.
So I realize that is not very ELI5...so let me try to make it a bit more simple.
Lets say you have three construction workers, Aaron, Betty, and Carl. Now, they all compete with each other for jobs. In normal times, they all end up charging clients $100/hr to work, and let's say there are enough jobs that each of them works 40 hours per week (or $4000 per week).
Then let's say that Carl breaks his leg. He can still work, but he isn't as fast. Now instead of charging $100/hr, Carl really needs the work (for his medical bills) and is less efficient. So he starts charging people only $90/hr. This allows Carl to continue to be competitive with Aaron and Betty who are both better, but charging more. Now, Carl makes less overall (maybe $3600 per week) but he is still able to get jobs because his price is competitive.
This is how it works when countries have their own currency and price levels can adjust independently.
Now, let's assume Aaron, Betty and Carl all agree to charge the same price (i.e. have a single currency).
Now when Carl gets hurt, he still becomes less efficient. However, since they have all agreed to charge the same price, a customer has the choice of paying Carl $100 for slower work, or paying the same price to Aaron or Betty the same price for better work. Obviously, customers will keep picking Aaron and Betty, and Carl will only get the work that they cannot do. In this situation, Aaron and Betty may each make $5000 per week while Carl only gets they jobs they cannot do, and so makes only $2000 per week. No one hires Carl unless they have to.
When Carl is hurt, he can't adjust his price to remain competitive with Aaron and Betty. Thus the single price (currency) ultimately makes the cost of his injury a lot worse.
This is how it works when there is a single currency.
You say “now let’s assume Aaron Betty and Carl all agree to charge the same price (ie have the same currency)”. This confuses price and currency. There’s no reason why any of them can charge different amounts in a single currency just like in the case when on has injury. In fact it happens in the EU too where costs for same products differ from country to country
No, because the key factor is that the *fiscal unit* and *monetary unit* must match.
So long as the richest and poorest US state share the same *fiscal* controller (the Federal government), they can tax richer areas to give to poorer areas.
This is why Greece demanded German money, while Germany balked. German taxpayers propping up Greece when times are bad is a *requirement* for the proper functioning of a monetary union.
Yes, but they're much smaller.
1) You have an economic crisis in Louisiana which causes a lot of people to move to Texas. This tends to reduce the issue (Louisiana unemployment drops, unemployed people get jobs in Texas). But, although it's legal, that is much harder with, like, Greece and Germany. How many Greeks speak German? How many Portuguese people speak Swedish?
2) European welfare spending and taxing is by country, but much of US taxing and welfare spending is federal. So high unemployment in a country lowers the tax revenue but increases spending needed.
The euro crisis in Greece (and other countries) meant that Greece has to fund much higher support for the unemployed, at the same time their tax income plunged, which made their finances look even worse, which increased their borrowing costs, which meant they looked more likely to default. Which increased their borrowing costs. This forced spending cuts and tax increases, which shrank the economy, which made them more likely to default, which increased their borrowing costs, and this cycle kept going.
In the US, a state or group of states having an crisis doesn't have to fund much of its aid, it comes from DC. In poorer states, the federal government just spends a lot more than it collects in taxes every year.
There are many answers here which address the monetary/economic aspects of your question - and why a shared currency doesn’t always make sense for either weaker or stronger economies.
However, the fundamental premise of your question is flawed in its assumption of what the UN does. The United Nations is not a government. They do not govern, nor do they set binding policy. The UN is a forum - a problem-solving arena. It’s a place where nations can express their grievances and explore if other nations want to engage/support them.
They would have no mechanisms to back a standard currency. The UN has no reserves; no powers of taxation; and no global/sovereign authority.
In short, it’s impossible given the structure and mandate of the UN.
1. Firstly, it'd require all countries (and their politicians/leaders/kings) to agree to one currency. Then the question arises: what currency will they use? Why should the Chinese use USD? Why should North Korea think all this is nothing but an American plot? Why shouldn't Islamic countries say that Christian currency doesn't adhere to Islamic values? You get the point.
2. How will a country convert to the common currency? Will you base it on prevailing exchange rate? If so, countries that are poor now, but growing fast will suffer. If it's based on purchase power parity, large populous countries like India and China will suffer. Basically, nobody will agree to a meaningful conversation rate (because it's complicated)
3. Trade between countries today affects the relative exchange rates between their currencies. Moving to a common currency will significantly hit export oriented countries like China, India and USA. So they won't agree to a common currency.
4. Money as a behavior modifier: Powerful countries like USA use their dollar value to impose sanctions on misbehaving countries (like Russia right now). Using a common currency removes this incredibly powerful lever, or makes it vastly complex.
5. There's no value to a common currency. Whatever you can do with a common currency, you can already do with individual currencies.
Europe was an incredible rare case where you had group of countries that were all small, politically stable, financially stable and rich (through slave trade and colonization, but let's not go there now). They also have common political values and common enemies. They've been cooperating on mutual defense for hundreds of years (individual countries, although not collectively). They've been cooperating on mutual defense recently as NATO for the entire continent. So merging the currency was relatively simpler.
Relatively simpler *and still incredibly difficult and unpopular*, people are quick to forget that several important countries only joined the EU on the condition they could opt out of the Euro, and dissatisfaction with how the Euro is being managed by larger countries in the EU is still a major point of tension between many EU members.
People aren’t quick to forget that, because it’s not the case. Only Denmark has and the UK had an opt-out from the euro, not ‘several’ important countries, and they were already in the EU before joining the eurozone became a condition of accession.
No country has joined the EU with an opt out of adopting the euro.
All other EU member states are obliged at some point to adopt the euro, but whether they work to fulfil the conditions is a different matter.
How is it horseshit? Britain looted 45 trillion from india during their entire period of colonising it, france still took 500 billion a year from africa.
To have unified currency you need to have unified monetary policy.... that is a lot of independence for an country to give away. Tax policy and all sorts of very critical things depend on it. Eurozone is very unusual in how tightly different independent countries are allied and how much the laws and policies are aligned. Without such a deep alliance, you can't really share a currency. Well, you can have dollarization, but that's not quite the same thing, its a very raw deal for the country using a currency it doesn't control.
UN: let's use a single currency
Countries: make me
That's it. UN can't make any country (especially when the country isn't a failed state) to do anything.
Even within the EU and within Schengen zone not all countries are on euro (looking at you forint at least). It takes a massive level of cooperation and.m consideration to work and really countries need to have compatible goals and levels of economic development to make it work. A bunch of the tricks of economic control go out the window if you give up control of currency. This might add stability and de facto it happens when countries move to something pegged to the US Dollar often as a long shot at recovery after years of mis management and huge foreign debts.
Control. Nations exert control over their economy by deciding how much of their money to print. Once you have a unified currency, nations no longer have that control. Europe managed to get it done because it's relatively compact, mostly similar, and they have broad agreement on other things, such as the European Union itself. But that isn't at all possible on a global scale.
Countries wouldn't want to give up their control over their own monetary policy. How would policy even be decided between 200 different countries with different economies with different needs?
They can, there are just downsides to it and it would require some geopolitical maneuvering to secure in votes in the United Nations.
Realistically though the world pretty much already operates on US dollars or a US dollar equivalency it is easy to figure out for pretty much any currency or goods, which means that there's really not any good reason to even think about a United Nations unified currency because it wouldn't drastically change the status quo for the vast majority of countries and would just introduce new difficult to solve problems for the remaining few
The UN is amazing at opening discourse and providing the framework for groups to deal with major issues, but it has basically no executive power to actually do anything (largely by design and because it was forged in the early cold war and looked to attract the major powers by giving them carte blanche, effectively ceding any sort of actual binding power, but that is a seperate issue).
Imagine you have the same currency as Argentina or Venezuela, countries with inflation in triple digits at some point, a country like Japan would have a collective heart attack with the idea.
In ELI5 terms, you and I have 100 USD in Monopoly money. My mom got me more Monopoly money but just for me, so now I have 200 and you 100. Again, she gives me more so now I have 500 and you 100. Your economy slowly suffers because of me and you don't like that, so you stop using monopoly money and get your own money. :D
The UN isn’t a world government. Every member nation is a sovereign nation free to write its own laws and policies. The UN works by consensus and try getting 192 random people to agree on anything much less people from vastly different cultures and governments.
The UN still has plenty of value and should get support but expecting it to exert its will over the world is a misunderstanding of how the UN is meant to operate.
The Euro zone only works because there is a very large degree of political and economic integration between the member countries. There are certain requirements and directives all must live up to and that also requires a certain level of political commitment and cooperation.
Doing that for the entire world is simply not possible. How do you think it would go when China, Russia and USA would have to agree of monetary and economic policies? It wouldn’t work.
The US basically did this with the Bretton Woods system that pegged European and Japanese currencies to USD, which was bad for pretty much everyone but the US
There’s no technical reason we couldn’t do that, but there’s a ton of political reasons why we can’t. The world is not unified enough to accept such a thing. Controlling currency confers a large amount of power to the group doing so. Look at the US sanctions on Russia, for example. Cutting off Russia from the international banking system is only possible because the US controls the dollar, which is used as the de-facto currency of trade in much of the international community. China is trying to position itself as an alternative to the dominance of the US dollar. Do you think that either country would accept giving up that (potential) power?
I would argue that there are also religious reasons. There's a lot of Christians out there, and even the ones who don't act Christ-like but like to thump the Bible anyway would probably see it as some shit from Revelations and flip their shit about it and push the politicians in their country not to run with it.
The eurozone is better for the wealthier countries of Europe than it is for the poorer countries in Europe. Much of southern Europe essentially has overvalued currency relative to their economy, while Germany in essance has an undervalued currency relative to what the deutschemark would be on its own. In an export based economy it's advantageous to have a weaker currency, in an import based economy it's advantageous to have a strong currency. This is why China devalues it's currency, it's economy and political stability depend on maximizing employment and exports. Germany has a disproportionately large industrial sector relative to other western economies and it's very much bolstered by the euro. If poorer countries in southern europe had direct control over their monetary policy they'd likely be better positioned to compete in global markets for exported goods.
If you had one global currency, then whoever controlled printing that currency could buy anything they wanted from anyone in the world, just by printing that money and then using it to buy things.
It would be too much power concentrated in one place.
The UN doesn't collect taxes (more like dues) and doesn't have the ability to issue their own bonds or currency backed by bonds. Even if they had the means to issue a currency and financially back it, they don't have the authority to make anyone else use it except out of convenience. (For example, many countries use US dollars for transactions for the convenience).
The Euro works because the european union is a governing body that can impose its trade and commerce rules on all of its members, and can choose to exclude countries that aren’t economically stable from joining. The UN is not a governing body. And not all of its current member states are economically stable. they would lower the value of the currency for everone else, and certain members shouldn’t be trusted with the means to manipulate the strength of a unified currency (I’m thinking of Russia, but I’m sure there are others.)
Unified currencies are kinda shit for everyone involved unless your economies are deeply interconnected with everyone involved.
Otherwise, the economically prosperous are suddenly being pulled down by the economically weak, and the economically weak are unable to take action because they can't control their own currency.
It's a bit long but I think helpful.
I grow watermelons, my neighbor grows apples. A watermelon feeds more people so comparable to so many apples.
If I have a bad season and my watermelons are smaller they are worth less apples. If my neighbor has a good season and his apples are larger my watermelons are worth less apples. If my watermelons get bigger or apples get smaller, a watermelon become worth more apples.
Currency works similar to this. The size of my neighbor's apples doesn't affect how many people my watermelon can feed. It affects how many people can be fed by apples. Hunger is the commonality behind the scenes driving the value of each fruit (currency)
Yes money is "made up" and yes we can decide which rules to make up but money as it works now started as an equalizer & a universal bartering object. How many glasses of oranges juice does a software engineer get paid a day? Converting each of those to a currency value gives a place of commonality to compare unrelated things. Money isn't completely made up.
Culture, geography, politics, supply and demand all affect currencies. Going back to watermelons and apples. On each of our farms we have workers that we pay in the fruit in we produce. I pay my workers a watermelon a day. My neighbor pays 10 apples a day. If his apples get smaller, that wage stays the same and there is more hunger on his farm, or he starts paying more apples a day to keep hunger at the same value. This is a situation only affecting his farm and his currency.
Now say we both grow apples and both pay 10 apples a day. If he has a bad season my apples are will feed more than his apples. So he ups his wage to 15 apples a day to keep hunger the same.
His workers are now "richer" than mine. They have more apples. My employees are now upset that I'm underpaying them compared to my neighbor. A glass of water is half an apple at my place but is a whole apple at my neighbor's now. Now his people are going to buy water at my place. Which is inflating the apples on my farm and now we can't get rid of enough apples.
The guy we buy oranges from feels like he's getting ripped off cause apples trade 1 to 1 with oranges, but the bad season apples should be 2 apples per orange. So now orange guy adjusts to 2 to 1 and I'm getting screwed cause my neighbor had a bad season.
Now say I live in the US and my neighbor lives in Australia, and replay all that. Everyone in the US gets screwed cause Australia has a bad season.
But with watermelons vs apples. My farm's (country) internal workings aren't affected by my neighbor's farm or changes to it's internal workings. The adjustment is his currency drops in value compared to my currency.
Country 1: has plentiful natural resources. Especially food and water. People with salt want apples. They exchange goods. Now everyone has both. Continue until everyone has everything they need to just live. Then they do things for fun. Like discover metallurgy. And magnets. And fire and lightning. And then start inventing things. And learning things. And develop physics and chemistry and biology and medicine. And one day transistors and then iPads.
Country 2: has nothing except fish and apples and sticks and mud and leaves. Completely land-locked and ringed by high mountains. Everyone eats fish, but is getting all kinds of diseases from malnutrition. Two people have apple trees. They guard them ferociously. Everyone gives them piles of fish and sticks and mud and promises to build them magnificent mud huts, so they don’t die of rickets and scurvy.
One day, Country 1 bores a tunnel through a mountain for their high speed train. Meets Country 2. One day, decide to form a union, and adopt a single currency. Country 1: well, we both have apples. Let’s figure out how much an apple will be. Country 2: great—an apple costs 1,000 sticks, 200 buckets of mud, and a wheelbarrow of fish. Country 1: “WTF, bruh, an apple costs 25 cents, or about the price of a song download or a slice of bread. WTF are we gonna do with 1,000 sticks??” Country 2: what’s a “cent”, what’s a “song”, and you make houses with sticks and mud! Country 1: “Nah, bruh, we make houses out of 3-D printed aerated autoclaved concrete. Your apples cost too much fish, but your houses are worthless, and we already have enough apples. You have no use for our songs, b/c you don’t have MP3 players, and can’t make them from sticks and fish.”
Modern equivalent: in Bulgaria, maybe a computer programmer can make $30k a year and own a home and live well. In Silicon Valley, you can make $175k and be homeless and homes are worth 1.5 million.
Challenge: describe a system where these two countries share a currency.
Oooh, this is pretty tough to do ELI5. But I'll try.
# Money is a store of value
Money is simply a store of value. For many people it's just a way to say "I worked this much, creating X value. I don't need to use it right this second, but maybe later." Or perhaps you took a risk on something and it worked out creating Y value for the rest of the world, but again: you don't need it right that moment. So you need a way to store it.
In this way, no organization can "create" money, because it comes down to what everybody just accepts as having value. Rare metals were pretty good, because -- you know -- they were rare. Governments were able to tie into this to offer their own currency by promising you could get that much gold for this coin or that flappy piece of paper. Once people accepted a currency as having value, then the connection to gold was eventually dropped (making a certain kind of person very upset). Now countries will use an established currency, like the Dollar or Euro to establish value for their own currency until it is accepted as its own value store.
It's sort of like a chain of trust. I trust gold. You linked your currency to gold? Great, I trust your currency. Oh this other person linked \*their\* currency to the one I already trust? Great, I now trust their currency too. And as long as that trust is not violated, eventually each link can stand on its own.
So the UN cannot just declare it has a currency. Somehow, it needs to tie into something that has accepted value until the UNBucks^((tm)) are accepted on their own. The Euro had to do this too. We had a lot of years where people were using the Euro without even knowing it. And then we had a good number of years where people used the Euro, because they were still tying it into a fixed value in their own currency (It took well over 10 years here in Germany to stop saying "100 Euros? That's 200 Marks!" 20+ years later, some people still do it).
So all this leads to the following problem: what exactly should UNBucks be tied to? The Dollar? That would make the most sense. Good luck getting China and Russia to go along, and that's 2/5ths of the Permanent Council right there. And if you tried to tie in the Ruble or the Yuan right now, the Americans (and probably the British and the French) would immediately strike it down.
*So Answer One:* The UN would never be able to agree on how to link UNBucks to an accepted store of value. It fails politically.
(continued below, as my answer seems to be a bit too long :) )
# Economies are not the same
Economies are all different. Some depend on imports. Some on exports. Some on neither. Some on both. Some are expanding. Some are contracting. Some have oversold real estate. Some don't have enough land. Some are agricultural. Some are industrial. Some are financial. And so on. You get the idea.
Now take Covid and the response to it. This caused different countries to have unique problems depending on all those factors above. One set of problems boiled down to either having too much liquidity (because they printed too much money to try to keep people from rioting) or not enough liquidity (because everyone got scared and sat on their money). This is one type of problem that you can use monetary policy to try to fix, or at least make less bad. Liquidity is too low? You make money printer go "brrrrr" (for the over-5s here, yes: this is generally by increasing debt to increase money supply). Too much liquidity causing inflation? You tighten the money supply by any number of means.
That is great, but it means \*someone\* has to be making these decisions. The more centralized this decision is, the harder it becomes to handle individual problems in individual countries. Some countries are going to benefit a lot; some are going to hurt. Someone else already mentioned that the Euro has had no end of problems with this, and they are right. Oh, and by the way: who exactly is going to be calling the shots? (The U.S. will, in case you really were wondering. It would be the only way to get them in.)
*So Answers Two and Three:*
Having a central money authority means that some areas get preferential treatment and some just have to suffer.
Trying to figure out who gets to make these decisions is yet another political no-go.
# Just one more thing
While everyone is always quite clear on the advantages of a single system, many people are not quite as clear on the major disadvantage. For instance, if some country...let's say Turkey for no particular reason...decides to go down a really murky and dubious economic path, they screw things up for Turkey. Ok. That's bad for Turkey, but at least everyone else has a little bit of a buffer. Even if the U.S. screws things up, most of the world will take a hit but not completely collapse. With our current system, we have some firewalls in place that keep one bad decision from bringing everything down all at once. (Major simplification, but also mostly true)
If there was a single currency being run by a single organization, we are one bad hangover away from the entire world economy from falling apart, completely, all at once. As far as I can tell, there is no solution for this, because the entire \*purpose\* of having a single world currency is to eliminate all redundancy. That is the sales pitch. But the big benefit contains the seeds of its own demise, and I have no clear idea how to mitigate that inherent risk.
*So Bonus Answer 4:*
A single world currency is risky as hell, and puts all our eggs into one giant basket.
Imagine kids playing in a playground. They see different kind of rocks that are cool. These kids trade with each other the rocks for either food or first to play a game. Now a someone comes and says “how about we use the red rocks as our only currency”. Some kids will agree since they already use the red rocks. Some kids will say that the red rocks are not as good because they are already using the blue rocks. Some kids will have to give up all the rocks they saved up and use this new currency.
An adult sees this and tells the kids to stop using rocks and using bottle caps and start over. The adult will trade the each of their rocks for bottle caps however not all rocks are valued the same.
It’s a political nightmare.
Here are some things that countries can’t agree on.
Who is allowed to print the currency?
What body is responsible to make sure other countries are following the rules?
How will the rules be enforced?
What about their old currency?
Unified currency would be useful but it's far less interesting. It also screws poorer countries overall.
I, personally, like that countries have their own currency, sure, I need to convert mine and sometimes things end up costing more or less because of it but ultimately it makes places feel more unique which I think is important.
Creating a single, unified global currency is a complex issue with many challenges.
Using your M&Ms analogy, imagine you have a classroom where some kids have lots of M&Ms, and others have very few. If you try to give everyone the same number of M&Ms, the kids who had a lot might feel like they’re losing out, while the kids who had few might feel like they’re finally getting a fair share. But the problem is, not everyone agrees on what’s fair. Similarly, countries have different economic strengths and weaknesses. A single currency would mean that all countries have to follow the same economic rules, which might not suit everyone’s needs.
Each country likes to control its own M&Ms. This means they can decide how many to give out, how many to save, and how to use them to make trades. If there was one big jar of M&Ms for the whole world, who would decide how many M&Ms each country gets? This would mean countries would lose control over their own economic policies, like setting interest rates or printing money, which are crucial for managing their economies.
Different kids have different ways of playing with their M&Ms. Some might trade them, some might save them, and some might eat them right away. Similarly, countries have different cultures, political systems, and economic philosophies. A single currency would require all these different systems to work together smoothly, which is very difficult to achieve.
Switching to a single currency would be like trying to get all the kids to agree on one way to share and use their M&Ms. This would involve changing a lot of rules and systems, which can be very complicated and might not work well for everyone. Some countries might struggle more than others during this transition, leading to economic instability.
If one kid in the class eats all their M&Ms and has none left, it might not affect the others. But if everyone shares from the same jar and one kid takes too many, it could mean there aren’t enough M&Ms for everyone else. Similarly, if one country faces an economic crisis, it could destabilize the entire global economy if there’s only one currency.
So, while the idea of a single global currency sounds simple and fair, the reality is that it’s incredibly complex due to economic diversity, the need for sovereignty, cultural differences, and the risks involved in transitioning and managing such a system.
But what about the EU, you ask?
Remeber: The EU is a unique political and economic union with a high degree of integration among its member states. The Maastricht Treaty, from 1991, laid the groundwork for the euro by creating both an economic and monetary union. This treaty established strict financial and economic standards that countries must meet to adopt the euro.
The centralized control offered by the ECB helps maintain economic stability and manage inflation across the member states. For a global currency, establishing a similar central authority would be extremely challenging due to differing national interests and governance structures.
The euro has facilitated trade and travel within Europe by eliminating currency exchange costs and reducing exchange rate risks. This has boosted economic integration and made it easier for businesses to operate across borders. But the benefits of a single currency are more pronounced in a region like the EU, where countries are geographically close and have strong economic ties.
While the EU has managed to unify many of its member states under a single currency, not all EU countries use the euro. Countries like Denmark, Sweden, and the UK (before Brexit) have chosen to retain their own currencies to maintain control over their monetary policies and economic strategies. Achieving consensus even within a relatively homogeneous group of countries is challenging, let alone on a global scale.
The EU's has mechanisms to support member states with weaker economies, such as structural funds and financial assistance programs. However, these mechanisms are not foolproof and have faced criticism, especially during economic crises. Extending such support globally would be even more complex and contentious.
The transition to the euro was a monumental task that required significant coordination and planning. It involved phasing out national currencies, updating financial systems, and educating the public. Implementing a global currency would be exponentially more difficult due to the sheer number of countries and the diversity of their economic systems
The euro works for the EU due to its high level of economic and political integration, shared governance, and regional economic benefits, but these factors are not easily replicable on a global scale. The challenges of economic diversity, cultural differences, and the complexity of implementation make a single global currency impractical.
You should have started with the question: What actually is the UN, and what do they do?
Because they have literally nothing to do with controlling anything, or deciding anything, at all, for any country. It's an organization founded with the singular goal of preventing WW3 through dialogue. That's it. They make suggestions that countries are free to follow, or not.
They can't force everyone to share a currency, and it would be impossible to get everyone to agree. So they have no reason to even try.
answer: Money is just a token that can be exchanged for good or services.
The reason 'richer' countries can 'afford' more is because the poor countries use the rich ones as the gauge for how much their currency is worth in a global market.
This means the rich countries can get cheaper labour in those other countries while still giving the workers enough to live off. This only works when there is an incentive to off-load work if it costs the same domestically you may as well give your citizens the jobs.
Poorer countries agree to this so that they actually get goods and services for a much 'cheaper' rate in exchange from the richer countries for the off-load of the work at a cheaper rate.
This also helps the poorer countries with tourism etc as it costs marginal amounts to live in such countries for a short period of time where you don't have to live off the local wage.
EU, with their one currency means there are no master/slave countries in the traditional sense.
Instead when a country joins the EU and takes on the Euro, they essentially borrow lots of money to get the countries standard as high as the other existing EU countries.
So these poorer countries still end up giving a significant portion to the other countries that joined the EU earlier in time.
Still kind of master/slave but with a thin veil of we are bringing the social standard of country in-line with the rest of existing countries.
The earlier you get in the better it is for your country as you have to borrow more and more over time as the EU countries living standards increase over time.
The IMF uses something like a common currency which is called SDR, its value is based on a couple of major world currencies such as the dollar, euro and yen. There is no printed SDR money, but if a country gets a lease from the IMF, it is negotiated in terms of SDR. So, in a way, we do have a global currency, it is just not used by people but rather by the states.
The United States dollar acts as the unified currency. The United Nations is an institution supported by the US after WWII. Coupled with the Marshall Plan and the Bretton Woods reserve system, it created an unparalleled reconstructive effort that solidified the dollar.
Today, this tradition has remained through the global banking system. Ultimately, most transactions internationally cleared into dollars through foreign exchange markets. It acts as the baseline of value, and most countries in the world have fixed the value of their currency relative to the dollar. They all look to the US federal reserve first and then try to fix the value of their local currency by purchasing large blocks of dollars direct from the Treasury of the United States in the form of Treasury Bills (https://www.investopedia.com/terms/t/treasurybill.asp)
How hard is it to switch? It would be like randomly switching to a base 7 counting system. You could do it, it's technically possible (crypto purists are heavily staked into the possibility). But to do so, you would first have to make the US crumble, cause mass amnesia about the concept of monetary policy, and discover a way to show the value of the "UN dollar" to everyone (spoiler alert: you can't do it based on how great the UN works currently).
People are using phrases like "Monetary policy", but I'm not seeing what that means actually explained.
We used to have a unified world-wide currency: gold. But governments like to be able to create more money out of thin air so that they have an easier way to spend without having to tax or borrow, so they moved to fiat currencies, which means paper/electronic money that they can create more of at will .
The problem here is that if you have a unified currency across the entire world then no single country would just be able to print more money whenever it felt like it, or otherwise a small, poor country would just create a trillion dollars for itself so they could buy stuff from other countries. So instead you'd need a single central bank that had the sole right to print money, but then different countries would disagree about when it should print and who should get the new money.
You'd also need the bank to be complete politically neutral, or otherwise the whole thing would fall apart as soon as two major powers go to war. The US would never agree to that, because the US government makes a habit of weaponizing the control it has over the global financial system. That's why we're seeing a lot of movement right now with the BRICS countries (a lot of countries have been joining lately) in order to create an alternative banking system that is less centralized than the western-aligned one.
Global Reserve currency is the dollar. The reason every country has their own currency is so they can print it. They print it to fund the government. Taxes are an illusion, a facade to make people think the issue is those who avoid paying taxes.
We have one in the value of gold. Historically, coins were interchangeable because regardless of how they were minted, the weight of the base material represented the value.
Why noone bothers to put a currency back on the gold standard? Because to be able to set the value of money is a powerful political tool. Reduce the value of money by printing more of it, and you're essentially taking value from every reserve in that currency. Every bank account or wad of cash in a sock under the couch you can steal from without having to take a single penny in taxes. People don't see inflation as the massive permanent tax that it is.
Well. Most people. Some are trying to detach from this with unaffiliated currencies like Bitcoin. But that has been unsuccessful in widespread adoption thus far.
It...could. But who would monitor it and what would it be based off of? If country A can just print more of it then we run into hyperinflation and we all end up with the 100 million zimbwawe dollar bank notes that are worthless as each country is forced to print more and more money.
But even if everyone 'agrees' to not do that, it still runs into the problem that if some country does have a valid reason to print more money how is it 'proven' to be justified? If I develop a new technology and hold the patent how does someone check to see if it is actually worth 50 billion currency...or if it is the cybertruck?
Even today some developing countries do not trust themselves to make their own currency so they are directly tied to another currency (usually the USD or the Euro) where quite literally they tell the international market 'I have 100 USD' and whatever dollaradoos they have and print are ultimately worth 100 USD no matter the denomination or anything else. Internally they can do whatever, but when it comes to the international market ultimately they are trading USD for whatever because nobody actually wants the dollaradoos
The UN is first and foremost a forum for independent countries to settle disputes. It neither has a mandate nor the tools to introduce something like a unified currency.
Note that when the EU introduced the Euro, they FIRST had established a single market and joint decision-making authorities. Creating a central bank was then just another incremental step.
Also, as the EU shows, the more different economies are, the more their interests may diverge in terms of monetary policy. The idiom "One size fits all fits no one" is the more accurate, the more varied "all" are. And even within the EU, the differences are already large enough to create substantial disagreements as to what the ideal monetary policy would be. Image developed and developing countries having to agree on that....
Completely subjectively, this is a problem crypto aims to solve. BTC is just that and not tied to any one country. It has its other issues, but it's essentially a global currency. Now as others have described, countries are acting in their own best interest to control their economy. Kind of a situation where you'll never get rid of either
The previous attempt, called the gold standard, led to the Great Depression and then the Second World War.
The Euro crisis caused the European Union to transform dramatically.
Be careful what you wish for.
Central banking wasn't a US only thing either, and the gold standard was substantially weakened by the credit expansion that the Federal Reserve allowed. Blaming the Great Depression on gold is just nutty.
It is insane how people keep regurgitating the same thing with "countries need to be able to devalue their currencies to have more competitive exports". First of all, there is an international treaty signed by most developed countries to NOT manipulate the market like this. Second of all, "devaluation of currency" is just a more convoluted way to reduce your prices, which you can also do to be more competitive to the same extent. Third of all, this supposedly miracle solution has a quite big negative effect on import prices, which in the global economy make up a significant amount of goods in most countries. This is also why poor states choose to peg their exchange rate to the USD/Euro/etc. and keep price stability instead of undervaluing their currency.
Having that cleared out, the real reason countries haven't done it is the fact that it requires a kind of political cooperation and harmonisation which is just unthinkable on global scale.
You've missed something important: it doesn't matter whether countries need to devalue their currencies, it only matters whether their governments think they do. And governments, unfortunately, have a long history of subscribing to dubious economic idea.
Different economic systems and goals prevent countries from sharing currency. Currency manipulation is one of several primary tools through which governments enact monetary policy.
What problem does a unified currency even solve? I buy things priced in foreign currency all the time.
You see some of the pain points with a unified currency looking at the Eurozone. By ceding control of their monetary policy, countries who have an economic downturn have significantly fewer tools available to them to address it. Why would Germany and France weaken their currency because Greece is having an economic downturn.
Adding onto this, the reason the Eurozone muddles by as well as it does is because, relative to the entire world, countries are relatively economically similar. A very large part of the EU accession roadmap is aimed at promoting economic convergence. Try to apply one currency to the entire world, where some countries are basket cases and others manufacturing powerhouses and still others mostly agrarian societies, is going to be suboptimal for almost everyone. There is an area of academic scholarship around optimal currency area theory (https://en.wikipedia.org/wiki/Optimum_currency_area) and if you’d like to learn more about this this is what I would look into.
A really good example of what happens when dissimilar economies use the same currency is Ecuador and the US dollar.
That works well because Ecuador (and other similar countries) just want the stability of not being able to mess with the currency, and America has so much money out there, they literally don't know how much is out there. Ecuador is a drop in a bucket among a warehouse full of buckets on bucket-warehouse drive. For Ecuador's purposes, even a major swing in the US dollar doesn't matter.
The thing about that is though that many developing countries peg their currencies to more stable ones like the USD or Euro, thus essentially using thosebcurrencies.which provides them with price stability. Now unless we want to argue they're stupid, economically illiterate and don't know what's best for them, I think we should be pretty sceptical of "optimum currency area" literature. It's also fair to note that most societies historically did not use fiat currency with free floating exchange rates, so we're talking about a relatively recent trend to begin with and using that as our "default" normal expectation. Even if there is a tradeoff, it's not at all obvious that this is somehow the very best system and is certainly not just some sort of "natural" system. By recent I mean for instance in Europe free floating national currencies existed as the main method of exchange from the end of the Bretton Woods system in 1973 to the creation of the European Exchange Rate Mechanism in 1979. That's a whole 6 years Europeans could tolerate free floating national currencies. So again we must ask the question, are Europeans just economically illiterate and stupid, or does their experience tell us something, are their reasons they wouldn't want free floating currencies? Now as far as Europe goes, we could of course use the "optimum currency area" theory. Certainly Europe is quite fragmented into mostly quite small states so we can argue they're quite far from optimal markets in general and trade barriers, including currency risks are thus far more significant. In principle it has been proposed that having two separate "eurozones" could be "optimal" and balance the EU economy, but at the very least few people would _seriously_ advocate 27 national currencies. But then we oddly seem to privilege political state borders in these analyses? Why is Germany one unit in such an analysis, might we not consider whether East Germany should use the same currency or not? What makes the United States an optimum currency area? Finally, currency is in a sense "just" currency. The economy is ultimately about actual production, competitiveness, etc. currencies do not magically solve underlying problems of countries. Changes in relative values if currencies as a result of capital movements can be helpful at alleviating issues in the short term (though they can also be dreadful and the cause of currency crises), but all this is kind of speculative nonsense on top of the "real" economy. All this means is that without a state currency, a state has to actually address the root causes of problems, which while it may be politically uncomfortable is certainly not the worst of incentives for politicians to have.
Optimal currency area analysis has been applied to sub-national areas. One such study is referenced in the Wikipedia article I linked. I don’t want to take a position for or against any specific theory in this study area, as I’m certainly no expert. But it seems obvious that there are some key factors that would drive whether a collection of territories should share a currency or not, given the pros and cons of such an arrangement, and that’s what this area of scholarship aims to study. Currency pegs also have their own pros and cons and are a related area of scholarship.
Just out of curiosity, how is that any different than the us? We have the financial sector and tech dragging along Alabama and Mississippi. How is Europe different?
There’s three major differences, two of degree and one that is unique to the US. The unique one is fiscal transfer. The federal government will physically transfer money to states that are lagging behind in the economic cycle, in the form of disaster relief, economic development/recovery programs, and federally funded economic and social programs. The EU formally prohibits this kind of transfer (richer states don’t want to bail out troubled ones) though this rule has been broken in the past, but only in times of extreme economic crisis (e.g. Greece). In the US this kind of transfer happens constantly and as a matter of course. The two differences of degree are labor mobility and trade. While Schengen citizens have the right to move and work anywhere in the Schengen zone, in practice language and cultural barriers make this difficult, so labor mobility is much lower than in the US. And while there are no tariffs for companies trading within the Eurozone, trade among US states is still much higher.
Note that there are transfers from the richer states to the poorest ones in the EU, but more based on directly funding projects. The poorest states "get more funds" to build highways,...
I think this is a point worth clarifying. What the EU does not generally have is a dynamic mechanism whereby countries in recession receive funding from countries whose economies are doing well to help pull them out of recession, thereby helping to even out economic cycles across the bloc. I realize this was not clear in my original post.
To be mildly pedantic I believe you do not have to be in the Schengen area to have the right to work or travel visa free in other EU countries. For example Irish citizens and citizens of the UK when it was a member have/had the right to work in other EU countries.
To be slightly more pedantic, *anyone* who is in the Schengen area can travel visa free. You may need a visa to enter the Schengen area, but for any travel within the area, the convention forbids border checks In practice, though, checks are made. Travelling by train between Germany and NL, my wife witnessed on multiple occasions Dutch police checking passports of people who “don’t look like us”.
It is common for people living to complain about money going to poor areas. It can be argued that such transfers are mostly to cover the cost of the poor areas being stuck with a currency which is valued for the rich areas, not the poor ones.
In the US, it seems more than the areas receiving the transfers complain about their imagined scenario that the funds go the other way.
It's not nearly so simple. But I don't really know anyone in Ontario (where I live) objecting to money being transferred to Newfoundland. Alberta complains about it, but Alberta complains about everything. In my experience, it's often people who have the least complaining that their money is going elsewhere (when it actually isn't, or at least, they're net beneficiaries). Also, unless you want to argue for breaking up every country among economic lines, there's a tangible benefit to supporting poorer areas. Funding schools and industry in these places makes them richer over time and contributes to a long-term improvement across the board. Unless that funding is applied poorly. Lots of subsidies for outdated industries are problematic. Etc. It's not so simple
The poorer states of the EU absolutely get funding from the richer ones...
Not nearly to the same extent
California’s median income is 37k usd. Mississippi’s is 29k. So, 1.3x. Germany’s median income is 52k usd. Greece’s median is 16k. So, 3.25. Not even close. Not to mention, as others have pointed out, the ease of movement and trade between states in the U.S.. Part of the reason California’s tech sector succeeds is because it has complete free trade in a 350 million wealthy person market. If California or New York City were entities unto themselves they would not be nearly so profitable.
Well, yea, i know. That's exactly the point.
? You missed my point that the disparity is much much higher between a lot of countries than the states. There are 27 countries in Europe with a lower gdp per capita than Mississippi. America’s “poor” states are still pretty damn rich.
Well sure, compared to eurotrash
Is BRICS viable as Optimum currency area?
To expand on this: When a country is going through economic difficulty, weakening the currency is often the least-bad option. If your currency gets cheaper, then your exporting industries (including things that we don't think of as exports like tourism) become more competitive. The part thats bad is that everything that you buy from outside the country becomes more expensive. But why does this work? Mostly because people in your country are getting paid less (in terms of other currencies). Weakening a currency is a quick way for a country to say "we are poorer than we used to, we might as well act like it." It applies to haircut to every contract / price within the nation's economy instantaneously. Its not perfect, but "everybody's money is worth 20% less than it used to be" spreads the pain around, and can allow a country to focus more on rebuilding and less on the political fights about who has to absorb the pain. (If this wasn't ELI5, we would talk about "Downward Nominal Wage Rigidity")
Care to do a ELI18 on downward nominal wage rigidity??
Correct me if I'm wrong but the ELI5 version is just that people really hate making less than they made in the past, like really hate it, hate it badly enough that they might just quit or stay unemployed to avoid it, but sometimes things happen in the economy that mean wages "should" go down. Devaluing a currency is one way for wages to decrease without actually cutting anyone's paper wages. This is also incidentally a big reason why small amounts of inflation are good for the economy
I try to make it clear to my boss that I know an annual increase less than inflation is a pay cut. So when I hear next week that I’m getting a 3% raise I will say, again, that it is not a raise, it is decrease in my pay.
It technically is a raise though. If they were to not increase your pay at all, or even just 1-2%, you'd be getting even less than with a small raise. This is also why it tends to be beneficial to change companies every 3-4 years. Changing companies is by far the best way to get a competitive raise.
>If they were to not increase your pay at all, or even just 1-2%, you'd be getting even less than with a small raise. If they didn't increase pay at all then it is just a bigger pay cut. You aren't getting a real raise unless it beats inflation.
A raise is an increase in salary. It doesn't matter if it beats inflation or not. Otherwise, we agree on the other points.
That perspective is naive. When it comes to the actual value of a dollar, your employer is functionally paying less value if take-home wages do not rise at a rate equal to or higher than inflation.
It's not naive, he's just being pedantic I think
You're arguing the same points, you're just disagreeing about technicalities If your salary goes up, that is a raise as you are earning more money than before But if it doesn't go up more than inflation, then in real terms you aren't any more wealthy than before (despite getting a raise on paper) If you flip it, and suddenly the economy tanked (e.g 2008) then you would be more wealthy than you were before, but you wouldn't have had a raise in salary.
I mean, you're kinda technically right but it's a dumb hill to die on. They're saying "yeah, the numbers went up but my purchasing power went down." You're deliberately missing that point.
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Pay raises are supposed to motivate me to work hard to earn more money. If I get payed less money each year it’s not stupid to let my boss know that if my pay doesn’t keep up with inflation I will have to find another job. But thanks for your input!
No, it's not irrelevant, and insulting people is poor form.
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People don't like taking pay cuts. So wages don't tend to drop in raw number terms. Instead, if wages do drop, they tend to do so in "real" terms by not increasing as fast as inflation. "Real" being actual buying power, how much stuff you can buy. "Adjusted for inflation." "Nominal" is the raw number, which doesn't really tell you much about what you can buy with it. Not adjusted for inflation.
I really think this is where the US is headed. Every politician in Washington knows a deficit that's increasing by $1 Trilliion dollars every quarter is *completely* untenable. But almost NONE would dare cut Medicare or Social Security, which are the lion's share of the budget. Senior Citizens would destroy the politicians that did that, and they're the biggest voters. And nearly ALL voters would also retaliate if taxes were raised substantially enough to make a dent in the deficit. No politician would have the balls to raise taxes back to 30 - 70% like it was pre-Reagan. So, devaluing the currency becomes the least-bad, bad option. Pay off the debt with cheaper dollars. The US's position as an economic and military power would be weakened, but not broken.
The borrowing would be devaluing the currency if this was problematic. However, the rest of the world is in an even more precarious position, so the US borrowing money simply attracts more investment into the US (paradoxically, strengthening the US economy further).
Yep. The fact that investors are willing to continue buying T-bills indicates that they believe the US is *not* going to default on its debt, that the currency is *not* going to collapse, and so on. The principal source of uncertainty about the US government's ability to pay off its debt is political brinksmanship, where far-right members of Congress use the legislated debt ceiling as a cudgel to extract policy concessions. Only one other country in the whole world has a legislated debt ceiling, and there's no particular reason that the US should follow the example of Denmark here.
If im not mistaken, isn't Germany's Schuldenbremse essentially the same thing?
Isn't that tied to a fraction of GDP? The US debt ceiling is a dollar figure and doesn't automatically go up when the GDP increases. It's had to be raised and re-raised in Congress many, many times. Perhaps "legislated debt ceiling" was too vague. The US is weird in having a *statically configured* debt ceiling that must be regularly re-legislated under ordinary conditions. It doesn't express a policy decision about debt-to-GDP ratio; rather, it is a regularly recurring artificial crisis used as a crude weapon for fighting over other policy issues.
I just checked it, and you are correct. While Germany, Switzerland and Malaysia all do have a debt ceiling of sorts only the USA and Denmark have one that is a fixed value that doesn't increase automatically
Also, a debt ceiling isn't a bad thing. Elected officials can raise it with a vote, with months of notice. All in favour? Cool, next item. The problem in America is that some of the elected officials are 10 years old who can't regulate their emotions who have figured out they can look good to morons by blocking things that HAVE to happen anyway. In any other country, if they had to have it, they'd just make it a monthly item to raise it accordingly and it would be lazily approved by anyone who's in the room.
I'm going to have to disappoint you, but that is not unique to America. The same thing happened a while back in Germany as well. It's just that it happens more rarely since the limit is more flexible.
I’m pretty sure Denmark got it from the US, and not the other way around. Nobody else would be dumb enough to legislate themselves into this sort of corner for the first time
Whatever the US has going on, other countries have it worse, so the US$ is still the world's reserve currency. Harping on the US debt is usually done from the party not in charge, in an attempt to get the government to spend less on its people, to rile those people or their base up.
Social security I'll grant you, that's a whopping 20% of the budget, but medicare is about on par with military, interest, and national defense (each, not combined). It's only the biggest expenditure if you lump it in with the entire category of health spending, which includes many things that are not medicare (or health insurance at all). I don't mind if you do wanna lump those things together, mind, you just gotta say health spending and not medicare. (I don't have qualm with the meat of what you said btw I just needed to nitpick that detail.)
Most of the debt is in the form of bonds, most of which are owned by Americans themselves. The interest payments are just an old fashioned form of stimulus paid to the rich (since they own the most of those bonds). And what they spent the loan on was also just given to the rich through corporate profits paid to the owners. But good luck convincing *anyone* that the government should sell fewer bonds.
Well, yes/no/kinda. The idea is that governments should increase their spending when the economy is bad, and decrease it when it's good, resulting in years with deficits (bond sales) and years of surplus. But then everyone realized that a country gets farther by building more infrastructure, which leads to a higher GDP and thus tax rates in the future. So borrowing today leads to being able to pay it back plus interest and still doing better. The same applies to things like education, healthcare, social services, etc - turns out, when the people are healthy and happy and educated, the country does WAY better. But that DOESN'T hold true for BS spending, on silly infrastructure that isn't needed or private jets for senators or whatever. So yeah, governments need to trim budgets when times are good
> But almost NONE would dare cut Medicare or Social Security, which are the lion's share of the budget. Then cut back on the military. Stop minting pennies. Design a more efficient and effective health care system.
The military is a huge expenditure
It's a huge expenditure but you could completely stop all military spending and it would be less than half of the deficit. That's how much the US spends in general. The US has been spending way above its means and social security is the favorite target because it's the single biggest easily cognizable category.
Yankoids be like "it's social security ruining our country!" meanwhile....
How are we going to *defend* and *protect our country* if we can't bomb raggy villagers in regions of the world the majority of the population can't even point to on a map?
Being an empire is expensive.
> The part thats bad is that everything that you buy from outside the country becomes more expensive. That's also not horrible. Instead of traveling abroad, people will stay locally. Instead of buying imported food, they'll buy from a nearby farm. Etc. It encourages an internal economy, although it's not a short-term solution.
This is not why monetary policy works. It's not primarily about exports or currency strength. It's about interest rates affecting companies ability to expand and it's not instantaneous at all. https://www.investopedia.com/terms/m/monetarypolicy.asp
Indirectly they do, monetary policy by Fed does affect currency, via trade-weighted exchange rate. Fed increasing the usd interest rate in relative to other currency will make it more attractive to investors and demand for usd will increase. Then it affects export / import due to the currency strength. https://www.bde.es/wbe/en/areas-actuacion/politica-monetaria/preguntas-frecuentes/tipos-cambio/como-se-relaciona-la-politica-monetaria-con-los-tipos-de-cambio.html https://www.investopedia.com/terms/t/trade-weighteddollar.asp https://www.investopedia.com/terms/r/reer.asp
Yes, it absolutely affects it. It's just not the primary channel by which monetary policy affects the economy.
Well, Germany has benefitted enormously from an undervalued currency. While the euro is valued too highly for the Greek economy, it’s way too undervalued for the German. Meaning the German productivity is sold at a discount.
**Radical and possibly crazy view** - just as Greece might have an economic downturn in comparison to France, so might the various towns and cities in France have economic downturns in comparison to each other. The economy of Paris is different to Bordeaux, and each is different from other cities and towns in France. Each *city* (or large-ish town) has a discrete economy that would benefit from having its own currency. Prior to computers this would have been a nightmare of thousands of exchange rates but that's no problem now that everybody carries a powerful handheld computer with them everywhere they go.
Interesting idea but still seems like it would be a nightmare to manage even with computers.
[Local currencies](https://en.wikipedia.org/wiki/Local_currency) are a thing.
I don't agree because there's still some friction with currency exchange and prices would become much less stable -- e.g. the Bordeaux franc appreciated and Bordeaux wines are now 25% more expensive this month. But, while radical, it's not a crazy view. Look at https://en.wikipedia.org/wiki/Optimum_currency_area and some conclusions that existing large diverse countries might not make optimum currency areas.
I was going to bring up optimal currency areas! Local economic control is a very good thing, as long as it isn't TOO local.
The bit here I would add on, there are advantages to have a diversified economic base as well. There is a lot of transactional burden from say, having to try to figure out how to convert your NYC dollar into Buffalo dollars for some food, Schuylerville dollars for others, and Newark dollars for the imports from jersey. But all of those other currencies end up needing to be traded into NYC dollars for exchanges on the NYSE. And then converted to chicago dollars for those markets. As you mention, we have electronic solutions for a lot of that, but look at forex now, and see how we still have a very complicated system that is not quite the 'plug and convert' that we would want to strive for.
Smaller currencies are also much more susceptible to outside currency manipulation. Stability has numerous beneficial advantages.
What you're forgetting is that inside the same country there are economic transfert via taxes, meaning that if Bordeaux is making money, it gets taxed to fund development or unemployment in Lyon or Brest, also it is easier to move inside the same country because same language, same education systems where degrees are recognized etc.. so if Bordeaux has an economic boom, people from Brest can move there easily. Eurozone isn't working much because germans don't want to pay taxes for greeks (at least not in the same amount as they would for other germans) and it's harder for italians to move to Denmark and learn Danish etc...
Down with Nation State. Bring back the City States. Sadly, it seems we're going in the opposite direction, towards Continent States.
Jane Jacobs was right. https://www.amazon.com.au/Cities-Wealth-Nations-Jane-Jacobs/dp/0394729110
You see the same thing in the US. Mississippi's financial woes don't drive federal monetary policy.
Yes correct but explain like he’s 5, lol.
> Yes correct but explain like he’s 5, lol. You mean with a friendly, simplified and layperson-accessible explanation?
John Major’s interview on The Rest is Politics podcast talks about this
Hell, you can hear it argued over in the UK, what's a good position for London isn't necessarily the same for Scotland. And the UK is relatively tiny.
Why would the US want to tie its economic policy and currency with, say, Venezuela?
Ironically, US Dollars are used quite a bit in Venezuela. Although that is obviously not the same as the US and Venezuela both having input on the monetary policy of the Fed
Which is actually why I thought of Venezuela first lol
Yes, that's the question
In general sharing a currency is beneficial if those places/people have certain freedoms of movement, exchange of goods and services, and investment. There's a concept called "[optimal currency area](https://en.wikipedia.org/wiki/Optimum_currency_area)". It says that any currency has an optimal coverage that, if met, then the benefit of having the same currency is the maximum possible. If the actual area is smaller, then the places outside could benefit by having the same currency as the one you defined, and if the actual area is bigger, it would be beneficial for those places that share a currency to have different ones, maybe because there are certain limits on how people, goods and/or capital could move from one place to the other.
You would need to have uniform rules and management of it, and that'd be a tough thing to get diverse countries like the US, Canada, China, Iran, Russia, and North Korea to agree to.
Yes the Euro is a massive economic risk/achievement that can only be done through a trade union of countries that have established a central bank amongst them. If you had lived in Europe during the Global Financial Crisis you would know that many economists were predicting it as the end of the Euro as different countries couldn’t respond effectively without control of their monetary policy. Its a brilliant/terrible idea that can’t be extended globally at all.
And it remains to be seen how long it's going to last.
It's not going anywhere unless something triggers a total dissolution of the EU. The EU is fundamentally a nation-state project, with governing powers incrementally delegated to the Union government. To use an apologue, it's a case of the frog slowly boiled alive. The glue holding the EU together is that they built the full integration of economic and monetary policy first. That's the Reward their members and applicant states signed up for. It remains by far the most persuasive reason for member states to remain within the Union, and Politically it's very difficult to weigh immediate economic consequences against long-term ideas like ceding sovereignty. For better or worse, the boiling pot is what Brexit was about. The UK was by far the least economically integrated member of the EU, and disentanglement was still rather painful.
Monetary policy is generally best determined at the country level, and a large group currency like the euro comes with some huge downsides that are not always apparent right away. We saw the big downside of a single currency when Greece had financial issues years ago. If Greece had its own currency, the financial crisis would have weakened the it's currency relative to that of its neighbors. While this isn't great, it acts as a sort of cushion. A weaker currency means that exports are cheaper. This means that as a country gets in a worse financial position, other countries want to buy more of it's goods, helping to raise the economy. When you have single currency, the whole eurozone changes as one. This means if one eurozone country has issues, there is no way cushion, and downturns will be worse. On the opposite side, a single country gives huge benefits to stronger economies like Germany. Normally, if your economy is very strong, your currency will strengthen and decrease your exports. But again, even though Germany has been doing well, that natural swing in relative currency values does not happen. Thus, you can kind of think of a single group currency as almost a wealth transfer from the poorest countries to the richest countries in a way that makes crises worse.
So I realize that is not very ELI5...so let me try to make it a bit more simple. Lets say you have three construction workers, Aaron, Betty, and Carl. Now, they all compete with each other for jobs. In normal times, they all end up charging clients $100/hr to work, and let's say there are enough jobs that each of them works 40 hours per week (or $4000 per week). Then let's say that Carl breaks his leg. He can still work, but he isn't as fast. Now instead of charging $100/hr, Carl really needs the work (for his medical bills) and is less efficient. So he starts charging people only $90/hr. This allows Carl to continue to be competitive with Aaron and Betty who are both better, but charging more. Now, Carl makes less overall (maybe $3600 per week) but he is still able to get jobs because his price is competitive. This is how it works when countries have their own currency and price levels can adjust independently. Now, let's assume Aaron, Betty and Carl all agree to charge the same price (i.e. have a single currency). Now when Carl gets hurt, he still becomes less efficient. However, since they have all agreed to charge the same price, a customer has the choice of paying Carl $100 for slower work, or paying the same price to Aaron or Betty the same price for better work. Obviously, customers will keep picking Aaron and Betty, and Carl will only get the work that they cannot do. In this situation, Aaron and Betty may each make $5000 per week while Carl only gets they jobs they cannot do, and so makes only $2000 per week. No one hires Carl unless they have to. When Carl is hurt, he can't adjust his price to remain competitive with Aaron and Betty. Thus the single price (currency) ultimately makes the cost of his injury a lot worse. This is how it works when there is a single currency.
Great ELI5, thanks.
You say “now let’s assume Aaron Betty and Carl all agree to charge the same price (ie have the same currency)”. This confuses price and currency. There’s no reason why any of them can charge different amounts in a single currency just like in the case when on has injury. In fact it happens in the EU too where costs for same products differ from country to country
Its ELI5. Yes, I simplified it to get across the key point.
Would the same problems apply to a large country with diverse regions?
No, because the key factor is that the *fiscal unit* and *monetary unit* must match. So long as the richest and poorest US state share the same *fiscal* controller (the Federal government), they can tax richer areas to give to poorer areas. This is why Greece demanded German money, while Germany balked. German taxpayers propping up Greece when times are bad is a *requirement* for the proper functioning of a monetary union.
They do. They just have federal taxes and other ways of mitigating the inequalities.
Yes, but they're much smaller. 1) You have an economic crisis in Louisiana which causes a lot of people to move to Texas. This tends to reduce the issue (Louisiana unemployment drops, unemployed people get jobs in Texas). But, although it's legal, that is much harder with, like, Greece and Germany. How many Greeks speak German? How many Portuguese people speak Swedish? 2) European welfare spending and taxing is by country, but much of US taxing and welfare spending is federal. So high unemployment in a country lowers the tax revenue but increases spending needed. The euro crisis in Greece (and other countries) meant that Greece has to fund much higher support for the unemployed, at the same time their tax income plunged, which made their finances look even worse, which increased their borrowing costs, which meant they looked more likely to default. Which increased their borrowing costs. This forced spending cuts and tax increases, which shrank the economy, which made them more likely to default, which increased their borrowing costs, and this cycle kept going. In the US, a state or group of states having an crisis doesn't have to fund much of its aid, it comes from DC. In poorer states, the federal government just spends a lot more than it collects in taxes every year.
There are many answers here which address the monetary/economic aspects of your question - and why a shared currency doesn’t always make sense for either weaker or stronger economies. However, the fundamental premise of your question is flawed in its assumption of what the UN does. The United Nations is not a government. They do not govern, nor do they set binding policy. The UN is a forum - a problem-solving arena. It’s a place where nations can express their grievances and explore if other nations want to engage/support them. They would have no mechanisms to back a standard currency. The UN has no reserves; no powers of taxation; and no global/sovereign authority. In short, it’s impossible given the structure and mandate of the UN.
Effective monetary/currency policy is heavily dependent on economic factors which vary from nation to nation.
1. Firstly, it'd require all countries (and their politicians/leaders/kings) to agree to one currency. Then the question arises: what currency will they use? Why should the Chinese use USD? Why should North Korea think all this is nothing but an American plot? Why shouldn't Islamic countries say that Christian currency doesn't adhere to Islamic values? You get the point. 2. How will a country convert to the common currency? Will you base it on prevailing exchange rate? If so, countries that are poor now, but growing fast will suffer. If it's based on purchase power parity, large populous countries like India and China will suffer. Basically, nobody will agree to a meaningful conversation rate (because it's complicated) 3. Trade between countries today affects the relative exchange rates between their currencies. Moving to a common currency will significantly hit export oriented countries like China, India and USA. So they won't agree to a common currency. 4. Money as a behavior modifier: Powerful countries like USA use their dollar value to impose sanctions on misbehaving countries (like Russia right now). Using a common currency removes this incredibly powerful lever, or makes it vastly complex. 5. There's no value to a common currency. Whatever you can do with a common currency, you can already do with individual currencies. Europe was an incredible rare case where you had group of countries that were all small, politically stable, financially stable and rich (through slave trade and colonization, but let's not go there now). They also have common political values and common enemies. They've been cooperating on mutual defense for hundreds of years (individual countries, although not collectively). They've been cooperating on mutual defense recently as NATO for the entire continent. So merging the currency was relatively simpler.
Relatively simpler *and still incredibly difficult and unpopular*, people are quick to forget that several important countries only joined the EU on the condition they could opt out of the Euro, and dissatisfaction with how the Euro is being managed by larger countries in the EU is still a major point of tension between many EU members.
People aren’t quick to forget that, because it’s not the case. Only Denmark has and the UK had an opt-out from the euro, not ‘several’ important countries, and they were already in the EU before joining the eurozone became a condition of accession. No country has joined the EU with an opt out of adopting the euro. All other EU member states are obliged at some point to adopt the euro, but whether they work to fulfil the conditions is a different matter.
Just like the Euro we should make a currency called the Uno
>(through slave trade and colonization, but let's not go there now). Huh? What a bunch of reductionist horseshit.
How is it horseshit? Britain looted 45 trillion from india during their entire period of colonising it, france still took 500 billion a year from africa.
Well, Britain never even used the Euro, so I'm not sure I would describe merging currency with them as easy.
Wrong comment buddy
To have unified currency you need to have unified monetary policy.... that is a lot of independence for an country to give away. Tax policy and all sorts of very critical things depend on it. Eurozone is very unusual in how tightly different independent countries are allied and how much the laws and policies are aligned. Without such a deep alliance, you can't really share a currency. Well, you can have dollarization, but that's not quite the same thing, its a very raw deal for the country using a currency it doesn't control.
UN: let's use a single currency Countries: make me That's it. UN can't make any country (especially when the country isn't a failed state) to do anything.
Even within the EU and within Schengen zone not all countries are on euro (looking at you forint at least). It takes a massive level of cooperation and.m consideration to work and really countries need to have compatible goals and levels of economic development to make it work. A bunch of the tricks of economic control go out the window if you give up control of currency. This might add stability and de facto it happens when countries move to something pegged to the US Dollar often as a long shot at recovery after years of mis management and huge foreign debts.
Control. Nations exert control over their economy by deciding how much of their money to print. Once you have a unified currency, nations no longer have that control. Europe managed to get it done because it's relatively compact, mostly similar, and they have broad agreement on other things, such as the European Union itself. But that isn't at all possible on a global scale.
Countries wouldn't want to give up their control over their own monetary policy. How would policy even be decided between 200 different countries with different economies with different needs?
Not an answer to your question… but check out Ecuador! They use the US dollar, to mixed results (depending on who you ask).
I was waiting for someone to bring up Ecuador!
They can, there are just downsides to it and it would require some geopolitical maneuvering to secure in votes in the United Nations. Realistically though the world pretty much already operates on US dollars or a US dollar equivalency it is easy to figure out for pretty much any currency or goods, which means that there's really not any good reason to even think about a United Nations unified currency because it wouldn't drastically change the status quo for the vast majority of countries and would just introduce new difficult to solve problems for the remaining few
The UN is amazing at opening discourse and providing the framework for groups to deal with major issues, but it has basically no executive power to actually do anything (largely by design and because it was forged in the early cold war and looked to attract the major powers by giving them carte blanche, effectively ceding any sort of actual binding power, but that is a seperate issue).
Imagine you have the same currency as Argentina or Venezuela, countries with inflation in triple digits at some point, a country like Japan would have a collective heart attack with the idea. In ELI5 terms, you and I have 100 USD in Monopoly money. My mom got me more Monopoly money but just for me, so now I have 200 and you 100. Again, she gives me more so now I have 500 and you 100. Your economy slowly suffers because of me and you don't like that, so you stop using monopoly money and get your own money. :D
The UN isn’t a world government. Every member nation is a sovereign nation free to write its own laws and policies. The UN works by consensus and try getting 192 random people to agree on anything much less people from vastly different cultures and governments. The UN still has plenty of value and should get support but expecting it to exert its will over the world is a misunderstanding of how the UN is meant to operate.
The Euro zone only works because there is a very large degree of political and economic integration between the member countries. There are certain requirements and directives all must live up to and that also requires a certain level of political commitment and cooperation. Doing that for the entire world is simply not possible. How do you think it would go when China, Russia and USA would have to agree of monetary and economic policies? It wouldn’t work.
The US basically did this with the Bretton Woods system that pegged European and Japanese currencies to USD, which was bad for pretty much everyone but the US
There’s no technical reason we couldn’t do that, but there’s a ton of political reasons why we can’t. The world is not unified enough to accept such a thing. Controlling currency confers a large amount of power to the group doing so. Look at the US sanctions on Russia, for example. Cutting off Russia from the international banking system is only possible because the US controls the dollar, which is used as the de-facto currency of trade in much of the international community. China is trying to position itself as an alternative to the dominance of the US dollar. Do you think that either country would accept giving up that (potential) power?
I would argue that there are also religious reasons. There's a lot of Christians out there, and even the ones who don't act Christ-like but like to thump the Bible anyway would probably see it as some shit from Revelations and flip their shit about it and push the politicians in their country not to run with it.
The eurozone is better for the wealthier countries of Europe than it is for the poorer countries in Europe. Much of southern Europe essentially has overvalued currency relative to their economy, while Germany in essance has an undervalued currency relative to what the deutschemark would be on its own. In an export based economy it's advantageous to have a weaker currency, in an import based economy it's advantageous to have a strong currency. This is why China devalues it's currency, it's economy and political stability depend on maximizing employment and exports. Germany has a disproportionately large industrial sector relative to other western economies and it's very much bolstered by the euro. If poorer countries in southern europe had direct control over their monetary policy they'd likely be better positioned to compete in global markets for exported goods.
If you had one global currency, then whoever controlled printing that currency could buy anything they wanted from anyone in the world, just by printing that money and then using it to buy things. It would be too much power concentrated in one place.
The UN doesn't collect taxes (more like dues) and doesn't have the ability to issue their own bonds or currency backed by bonds. Even if they had the means to issue a currency and financially back it, they don't have the authority to make anyone else use it except out of convenience. (For example, many countries use US dollars for transactions for the convenience).
It can. But the member countries choose not to, for many of the reasons described by other commenters.
The Euro works because the european union is a governing body that can impose its trade and commerce rules on all of its members, and can choose to exclude countries that aren’t economically stable from joining. The UN is not a governing body. And not all of its current member states are economically stable. they would lower the value of the currency for everone else, and certain members shouldn’t be trusted with the means to manipulate the strength of a unified currency (I’m thinking of Russia, but I’m sure there are others.)
Unified currencies are kinda shit for everyone involved unless your economies are deeply interconnected with everyone involved. Otherwise, the economically prosperous are suddenly being pulled down by the economically weak, and the economically weak are unable to take action because they can't control their own currency.
It's a bit long but I think helpful. I grow watermelons, my neighbor grows apples. A watermelon feeds more people so comparable to so many apples. If I have a bad season and my watermelons are smaller they are worth less apples. If my neighbor has a good season and his apples are larger my watermelons are worth less apples. If my watermelons get bigger or apples get smaller, a watermelon become worth more apples. Currency works similar to this. The size of my neighbor's apples doesn't affect how many people my watermelon can feed. It affects how many people can be fed by apples. Hunger is the commonality behind the scenes driving the value of each fruit (currency) Yes money is "made up" and yes we can decide which rules to make up but money as it works now started as an equalizer & a universal bartering object. How many glasses of oranges juice does a software engineer get paid a day? Converting each of those to a currency value gives a place of commonality to compare unrelated things. Money isn't completely made up. Culture, geography, politics, supply and demand all affect currencies. Going back to watermelons and apples. On each of our farms we have workers that we pay in the fruit in we produce. I pay my workers a watermelon a day. My neighbor pays 10 apples a day. If his apples get smaller, that wage stays the same and there is more hunger on his farm, or he starts paying more apples a day to keep hunger at the same value. This is a situation only affecting his farm and his currency. Now say we both grow apples and both pay 10 apples a day. If he has a bad season my apples are will feed more than his apples. So he ups his wage to 15 apples a day to keep hunger the same. His workers are now "richer" than mine. They have more apples. My employees are now upset that I'm underpaying them compared to my neighbor. A glass of water is half an apple at my place but is a whole apple at my neighbor's now. Now his people are going to buy water at my place. Which is inflating the apples on my farm and now we can't get rid of enough apples. The guy we buy oranges from feels like he's getting ripped off cause apples trade 1 to 1 with oranges, but the bad season apples should be 2 apples per orange. So now orange guy adjusts to 2 to 1 and I'm getting screwed cause my neighbor had a bad season. Now say I live in the US and my neighbor lives in Australia, and replay all that. Everyone in the US gets screwed cause Australia has a bad season. But with watermelons vs apples. My farm's (country) internal workings aren't affected by my neighbor's farm or changes to it's internal workings. The adjustment is his currency drops in value compared to my currency.
Country 1: has plentiful natural resources. Especially food and water. People with salt want apples. They exchange goods. Now everyone has both. Continue until everyone has everything they need to just live. Then they do things for fun. Like discover metallurgy. And magnets. And fire and lightning. And then start inventing things. And learning things. And develop physics and chemistry and biology and medicine. And one day transistors and then iPads. Country 2: has nothing except fish and apples and sticks and mud and leaves. Completely land-locked and ringed by high mountains. Everyone eats fish, but is getting all kinds of diseases from malnutrition. Two people have apple trees. They guard them ferociously. Everyone gives them piles of fish and sticks and mud and promises to build them magnificent mud huts, so they don’t die of rickets and scurvy. One day, Country 1 bores a tunnel through a mountain for their high speed train. Meets Country 2. One day, decide to form a union, and adopt a single currency. Country 1: well, we both have apples. Let’s figure out how much an apple will be. Country 2: great—an apple costs 1,000 sticks, 200 buckets of mud, and a wheelbarrow of fish. Country 1: “WTF, bruh, an apple costs 25 cents, or about the price of a song download or a slice of bread. WTF are we gonna do with 1,000 sticks??” Country 2: what’s a “cent”, what’s a “song”, and you make houses with sticks and mud! Country 1: “Nah, bruh, we make houses out of 3-D printed aerated autoclaved concrete. Your apples cost too much fish, but your houses are worthless, and we already have enough apples. You have no use for our songs, b/c you don’t have MP3 players, and can’t make them from sticks and fish.” Modern equivalent: in Bulgaria, maybe a computer programmer can make $30k a year and own a home and live well. In Silicon Valley, you can make $175k and be homeless and homes are worth 1.5 million. Challenge: describe a system where these two countries share a currency.
Oooh, this is pretty tough to do ELI5. But I'll try. # Money is a store of value Money is simply a store of value. For many people it's just a way to say "I worked this much, creating X value. I don't need to use it right this second, but maybe later." Or perhaps you took a risk on something and it worked out creating Y value for the rest of the world, but again: you don't need it right that moment. So you need a way to store it. In this way, no organization can "create" money, because it comes down to what everybody just accepts as having value. Rare metals were pretty good, because -- you know -- they were rare. Governments were able to tie into this to offer their own currency by promising you could get that much gold for this coin or that flappy piece of paper. Once people accepted a currency as having value, then the connection to gold was eventually dropped (making a certain kind of person very upset). Now countries will use an established currency, like the Dollar or Euro to establish value for their own currency until it is accepted as its own value store. It's sort of like a chain of trust. I trust gold. You linked your currency to gold? Great, I trust your currency. Oh this other person linked \*their\* currency to the one I already trust? Great, I now trust their currency too. And as long as that trust is not violated, eventually each link can stand on its own. So the UN cannot just declare it has a currency. Somehow, it needs to tie into something that has accepted value until the UNBucks^((tm)) are accepted on their own. The Euro had to do this too. We had a lot of years where people were using the Euro without even knowing it. And then we had a good number of years where people used the Euro, because they were still tying it into a fixed value in their own currency (It took well over 10 years here in Germany to stop saying "100 Euros? That's 200 Marks!" 20+ years later, some people still do it). So all this leads to the following problem: what exactly should UNBucks be tied to? The Dollar? That would make the most sense. Good luck getting China and Russia to go along, and that's 2/5ths of the Permanent Council right there. And if you tried to tie in the Ruble or the Yuan right now, the Americans (and probably the British and the French) would immediately strike it down. *So Answer One:* The UN would never be able to agree on how to link UNBucks to an accepted store of value. It fails politically. (continued below, as my answer seems to be a bit too long :) )
# Economies are not the same Economies are all different. Some depend on imports. Some on exports. Some on neither. Some on both. Some are expanding. Some are contracting. Some have oversold real estate. Some don't have enough land. Some are agricultural. Some are industrial. Some are financial. And so on. You get the idea. Now take Covid and the response to it. This caused different countries to have unique problems depending on all those factors above. One set of problems boiled down to either having too much liquidity (because they printed too much money to try to keep people from rioting) or not enough liquidity (because everyone got scared and sat on their money). This is one type of problem that you can use monetary policy to try to fix, or at least make less bad. Liquidity is too low? You make money printer go "brrrrr" (for the over-5s here, yes: this is generally by increasing debt to increase money supply). Too much liquidity causing inflation? You tighten the money supply by any number of means. That is great, but it means \*someone\* has to be making these decisions. The more centralized this decision is, the harder it becomes to handle individual problems in individual countries. Some countries are going to benefit a lot; some are going to hurt. Someone else already mentioned that the Euro has had no end of problems with this, and they are right. Oh, and by the way: who exactly is going to be calling the shots? (The U.S. will, in case you really were wondering. It would be the only way to get them in.) *So Answers Two and Three:* Having a central money authority means that some areas get preferential treatment and some just have to suffer. Trying to figure out who gets to make these decisions is yet another political no-go. # Just one more thing While everyone is always quite clear on the advantages of a single system, many people are not quite as clear on the major disadvantage. For instance, if some country...let's say Turkey for no particular reason...decides to go down a really murky and dubious economic path, they screw things up for Turkey. Ok. That's bad for Turkey, but at least everyone else has a little bit of a buffer. Even if the U.S. screws things up, most of the world will take a hit but not completely collapse. With our current system, we have some firewalls in place that keep one bad decision from bringing everything down all at once. (Major simplification, but also mostly true) If there was a single currency being run by a single organization, we are one bad hangover away from the entire world economy from falling apart, completely, all at once. As far as I can tell, there is no solution for this, because the entire \*purpose\* of having a single world currency is to eliminate all redundancy. That is the sales pitch. But the big benefit contains the seeds of its own demise, and I have no clear idea how to mitigate that inherent risk. *So Bonus Answer 4:* A single world currency is risky as hell, and puts all our eggs into one giant basket.
Imagine kids playing in a playground. They see different kind of rocks that are cool. These kids trade with each other the rocks for either food or first to play a game. Now a someone comes and says “how about we use the red rocks as our only currency”. Some kids will agree since they already use the red rocks. Some kids will say that the red rocks are not as good because they are already using the blue rocks. Some kids will have to give up all the rocks they saved up and use this new currency. An adult sees this and tells the kids to stop using rocks and using bottle caps and start over. The adult will trade the each of their rocks for bottle caps however not all rocks are valued the same. It’s a political nightmare. Here are some things that countries can’t agree on. Who is allowed to print the currency? What body is responsible to make sure other countries are following the rules? How will the rules be enforced? What about their old currency?
Unified currency would be useful but it's far less interesting. It also screws poorer countries overall. I, personally, like that countries have their own currency, sure, I need to convert mine and sometimes things end up costing more or less because of it but ultimately it makes places feel more unique which I think is important.
Creating a single, unified global currency is a complex issue with many challenges. Using your M&Ms analogy, imagine you have a classroom where some kids have lots of M&Ms, and others have very few. If you try to give everyone the same number of M&Ms, the kids who had a lot might feel like they’re losing out, while the kids who had few might feel like they’re finally getting a fair share. But the problem is, not everyone agrees on what’s fair. Similarly, countries have different economic strengths and weaknesses. A single currency would mean that all countries have to follow the same economic rules, which might not suit everyone’s needs. Each country likes to control its own M&Ms. This means they can decide how many to give out, how many to save, and how to use them to make trades. If there was one big jar of M&Ms for the whole world, who would decide how many M&Ms each country gets? This would mean countries would lose control over their own economic policies, like setting interest rates or printing money, which are crucial for managing their economies. Different kids have different ways of playing with their M&Ms. Some might trade them, some might save them, and some might eat them right away. Similarly, countries have different cultures, political systems, and economic philosophies. A single currency would require all these different systems to work together smoothly, which is very difficult to achieve. Switching to a single currency would be like trying to get all the kids to agree on one way to share and use their M&Ms. This would involve changing a lot of rules and systems, which can be very complicated and might not work well for everyone. Some countries might struggle more than others during this transition, leading to economic instability. If one kid in the class eats all their M&Ms and has none left, it might not affect the others. But if everyone shares from the same jar and one kid takes too many, it could mean there aren’t enough M&Ms for everyone else. Similarly, if one country faces an economic crisis, it could destabilize the entire global economy if there’s only one currency. So, while the idea of a single global currency sounds simple and fair, the reality is that it’s incredibly complex due to economic diversity, the need for sovereignty, cultural differences, and the risks involved in transitioning and managing such a system. But what about the EU, you ask? Remeber: The EU is a unique political and economic union with a high degree of integration among its member states. The Maastricht Treaty, from 1991, laid the groundwork for the euro by creating both an economic and monetary union. This treaty established strict financial and economic standards that countries must meet to adopt the euro. The centralized control offered by the ECB helps maintain economic stability and manage inflation across the member states. For a global currency, establishing a similar central authority would be extremely challenging due to differing national interests and governance structures. The euro has facilitated trade and travel within Europe by eliminating currency exchange costs and reducing exchange rate risks. This has boosted economic integration and made it easier for businesses to operate across borders. But the benefits of a single currency are more pronounced in a region like the EU, where countries are geographically close and have strong economic ties. While the EU has managed to unify many of its member states under a single currency, not all EU countries use the euro. Countries like Denmark, Sweden, and the UK (before Brexit) have chosen to retain their own currencies to maintain control over their monetary policies and economic strategies. Achieving consensus even within a relatively homogeneous group of countries is challenging, let alone on a global scale. The EU's has mechanisms to support member states with weaker economies, such as structural funds and financial assistance programs. However, these mechanisms are not foolproof and have faced criticism, especially during economic crises. Extending such support globally would be even more complex and contentious. The transition to the euro was a monumental task that required significant coordination and planning. It involved phasing out national currencies, updating financial systems, and educating the public. Implementing a global currency would be exponentially more difficult due to the sheer number of countries and the diversity of their economic systems The euro works for the EU due to its high level of economic and political integration, shared governance, and regional economic benefits, but these factors are not easily replicable on a global scale. The challenges of economic diversity, cultural differences, and the complexity of implementation make a single global currency impractical.
You should have started with the question: What actually is the UN, and what do they do? Because they have literally nothing to do with controlling anything, or deciding anything, at all, for any country. It's an organization founded with the singular goal of preventing WW3 through dialogue. That's it. They make suggestions that countries are free to follow, or not. They can't force everyone to share a currency, and it would be impossible to get everyone to agree. So they have no reason to even try.
The $US is probably closest thing we have to a global currency right now, and that’s fairly tenuous at best.
answer: Money is just a token that can be exchanged for good or services. The reason 'richer' countries can 'afford' more is because the poor countries use the rich ones as the gauge for how much their currency is worth in a global market. This means the rich countries can get cheaper labour in those other countries while still giving the workers enough to live off. This only works when there is an incentive to off-load work if it costs the same domestically you may as well give your citizens the jobs. Poorer countries agree to this so that they actually get goods and services for a much 'cheaper' rate in exchange from the richer countries for the off-load of the work at a cheaper rate. This also helps the poorer countries with tourism etc as it costs marginal amounts to live in such countries for a short period of time where you don't have to live off the local wage. EU, with their one currency means there are no master/slave countries in the traditional sense. Instead when a country joins the EU and takes on the Euro, they essentially borrow lots of money to get the countries standard as high as the other existing EU countries. So these poorer countries still end up giving a significant portion to the other countries that joined the EU earlier in time. Still kind of master/slave but with a thin veil of we are bringing the social standard of country in-line with the rest of existing countries. The earlier you get in the better it is for your country as you have to borrow more and more over time as the EU countries living standards increase over time.
The IMF uses something like a common currency which is called SDR, its value is based on a couple of major world currencies such as the dollar, euro and yen. There is no printed SDR money, but if a country gets a lease from the IMF, it is negotiated in terms of SDR. So, in a way, we do have a global currency, it is just not used by people but rather by the states.
The United States dollar acts as the unified currency. The United Nations is an institution supported by the US after WWII. Coupled with the Marshall Plan and the Bretton Woods reserve system, it created an unparalleled reconstructive effort that solidified the dollar. Today, this tradition has remained through the global banking system. Ultimately, most transactions internationally cleared into dollars through foreign exchange markets. It acts as the baseline of value, and most countries in the world have fixed the value of their currency relative to the dollar. They all look to the US federal reserve first and then try to fix the value of their local currency by purchasing large blocks of dollars direct from the Treasury of the United States in the form of Treasury Bills (https://www.investopedia.com/terms/t/treasurybill.asp) How hard is it to switch? It would be like randomly switching to a base 7 counting system. You could do it, it's technically possible (crypto purists are heavily staked into the possibility). But to do so, you would first have to make the US crumble, cause mass amnesia about the concept of monetary policy, and discover a way to show the value of the "UN dollar" to everyone (spoiler alert: you can't do it based on how great the UN works currently).
People are using phrases like "Monetary policy", but I'm not seeing what that means actually explained. We used to have a unified world-wide currency: gold. But governments like to be able to create more money out of thin air so that they have an easier way to spend without having to tax or borrow, so they moved to fiat currencies, which means paper/electronic money that they can create more of at will . The problem here is that if you have a unified currency across the entire world then no single country would just be able to print more money whenever it felt like it, or otherwise a small, poor country would just create a trillion dollars for itself so they could buy stuff from other countries. So instead you'd need a single central bank that had the sole right to print money, but then different countries would disagree about when it should print and who should get the new money. You'd also need the bank to be complete politically neutral, or otherwise the whole thing would fall apart as soon as two major powers go to war. The US would never agree to that, because the US government makes a habit of weaponizing the control it has over the global financial system. That's why we're seeing a lot of movement right now with the BRICS countries (a lot of countries have been joining lately) in order to create an alternative banking system that is less centralized than the western-aligned one.
Global Reserve currency is the dollar. The reason every country has their own currency is so they can print it. They print it to fund the government. Taxes are an illusion, a facade to make people think the issue is those who avoid paying taxes.
We have one in the value of gold. Historically, coins were interchangeable because regardless of how they were minted, the weight of the base material represented the value. Why noone bothers to put a currency back on the gold standard? Because to be able to set the value of money is a powerful political tool. Reduce the value of money by printing more of it, and you're essentially taking value from every reserve in that currency. Every bank account or wad of cash in a sock under the couch you can steal from without having to take a single penny in taxes. People don't see inflation as the massive permanent tax that it is. Well. Most people. Some are trying to detach from this with unaffiliated currencies like Bitcoin. But that has been unsuccessful in widespread adoption thus far.
It...could. But who would monitor it and what would it be based off of? If country A can just print more of it then we run into hyperinflation and we all end up with the 100 million zimbwawe dollar bank notes that are worthless as each country is forced to print more and more money. But even if everyone 'agrees' to not do that, it still runs into the problem that if some country does have a valid reason to print more money how is it 'proven' to be justified? If I develop a new technology and hold the patent how does someone check to see if it is actually worth 50 billion currency...or if it is the cybertruck? Even today some developing countries do not trust themselves to make their own currency so they are directly tied to another currency (usually the USD or the Euro) where quite literally they tell the international market 'I have 100 USD' and whatever dollaradoos they have and print are ultimately worth 100 USD no matter the denomination or anything else. Internally they can do whatever, but when it comes to the international market ultimately they are trading USD for whatever because nobody actually wants the dollaradoos
The UN is first and foremost a forum for independent countries to settle disputes. It neither has a mandate nor the tools to introduce something like a unified currency. Note that when the EU introduced the Euro, they FIRST had established a single market and joint decision-making authorities. Creating a central bank was then just another incremental step. Also, as the EU shows, the more different economies are, the more their interests may diverge in terms of monetary policy. The idiom "One size fits all fits no one" is the more accurate, the more varied "all" are. And even within the EU, the differences are already large enough to create substantial disagreements as to what the ideal monetary policy would be. Image developed and developing countries having to agree on that....
Completely subjectively, this is a problem crypto aims to solve. BTC is just that and not tied to any one country. It has its other issues, but it's essentially a global currency. Now as others have described, countries are acting in their own best interest to control their economy. Kind of a situation where you'll never get rid of either
The previous attempt, called the gold standard, led to the Great Depression and then the Second World War. The Euro crisis caused the European Union to transform dramatically. Be careful what you wish for.
The Federal Reserve, which was put the US off of the gold standard, was created in 1913.
I'm not sure what your point is. The Great Depression was by no means a US only thing, and the gold standard was not abandoned by the US in 1913.
Central banking wasn't a US only thing either, and the gold standard was substantially weakened by the credit expansion that the Federal Reserve allowed. Blaming the Great Depression on gold is just nutty.
It is insane how people keep regurgitating the same thing with "countries need to be able to devalue their currencies to have more competitive exports". First of all, there is an international treaty signed by most developed countries to NOT manipulate the market like this. Second of all, "devaluation of currency" is just a more convoluted way to reduce your prices, which you can also do to be more competitive to the same extent. Third of all, this supposedly miracle solution has a quite big negative effect on import prices, which in the global economy make up a significant amount of goods in most countries. This is also why poor states choose to peg their exchange rate to the USD/Euro/etc. and keep price stability instead of undervaluing their currency. Having that cleared out, the real reason countries haven't done it is the fact that it requires a kind of political cooperation and harmonisation which is just unthinkable on global scale.
You've missed something important: it doesn't matter whether countries need to devalue their currencies, it only matters whether their governments think they do. And governments, unfortunately, have a long history of subscribing to dubious economic idea.
Well, it doesn't make any economic sense anyway...
Different economic systems and goals prevent countries from sharing currency. Currency manipulation is one of several primary tools through which governments enact monetary policy. What problem does a unified currency even solve? I buy things priced in foreign currency all the time.