This may be a GD or IMHO topic but I’ll start it here.
What would be the reasonable implications if, using my powers as leader of the earth, I declared that, starting from tomorrow morning, we’d all use one currency for all transactions on this planet.
I’ll call it the Globie and it’ll be frozen now and forever more at the exchange rates that are currently in affect. It’ll replace all other currency and all business will now be done in Globies.
Will I just put some currency-exchange financial wonks out of business or would I change the world as we know it today?
The big problem would that which has hit the Eurozone on occasions. The main purpose of a central bank is to help maintain its associated economy by controlling money flow, when an ecomomy is in the doldrums you increase money flow to help encorage growth, when its overheating and threating inflation you decrease money flow. However there is no gaurantee that country A’s economy will be doing the same thing as country B. So if the global central bank does what’s suitable for country A then country B will be screwed, and vice versa.
A single currency removes the ability of individual nations to set their own monetary policies. If the US economy is stagnant, the US might decide to lower interest rates to get people spending. If the Canadian economy is experiencing inflation, Canada might want to raise interest rates to deter spending and promote saving. The US and Canada could take opposite measures to deal with their domestic economic issues. With a single currency they lose the power to do that. The decision of what to do would end up in the hands of some sort of world central bank.
Couldn’t legislation be added such that you had to borrow from a bank within your own country? That would seem to restore the ability to locally control money flow.
Just as nowadays the ideal monetary policy for each state in the US is different, yet the Fed makes a one-size-fits-all decision.
During the oil bust in the late 70s, Texas & OK were in the shitter & most of the rest of the US was doing fine. So they had to put up with a less reflationary policy than would have been ideal for them.
The same drama has played out in Europe over the last 5 years, and will for the next 5 as well. The situation in Spain, Latvia, and much of Eastern Europe is much messier today than it might have been had they had separate currencies during the boom and managed them wisely at the time. Then again, had they been independent then they may well have made an even bigger hash of things then, or found themselves in a small boat in a big storm now.
Bottom line: Floating exchange rates provide a lubricant to permit countries or industries which aren’t keeping up to degrade more gracefully and with less political backlash. They also provide a handy way for a few folks to get uber rich playing games.
A single world currency would eliminate both those things. Insead of the US declining over the next 20 years by inflating away our debts & becoming steadily poorer as imported goods get more exensive in dollars while leaving average pay the same number of dollars, we’d decline by leaving import prices the same number of dollars and people taking home a smaller number of dollars each year through forced pay cuts. Which one do you think goes down better in a democracy?
The other significant factor about a world currency is the decision making of the central bank. The OP posits a dictatorship under him(her?)self, so that’s not much of an issue.
But back in the real world … Thus far in the current mess, the Fed has been fairly decisive; the ECB (arguably) rather less so due to its split leadership & divided loyalties.
Imagine if the UN had been in charge of the currency last year when things were melting down. They’d still be bickering about whether or not to include a ritual denunciation of the Zionists in the Formal Declaration of Outrage which would precede appointing a committee of 200 to discuss whether or not a committe should be appointed to study what to do about the crisis.
That would not be a good way to run something important.