Eli5: Is it important that each country has its own currency ? And if so, why?
In: Economics
Control over the currency allows a country’s government to set monetary policy—by controlling the circulation of currency in the economy, they can try to affect the rate of inflation to stimulate the economy in a depression or slow the rate of a bubble, or affect exchange rates with foreign currencies which will affect the cost of imports and exports. They can also issue more of the currency to help pay off government debts, though economists usually think they shouldn’t.
Usually a country having its own currency a good thing, because each country has different needs for its economy. However, it also makes trade between them more difficult. Countries with similar economies and lots of trade connections can benefit from agreeing to use the same currency and monetary policy to improve trade, like in the Eurozone. And governments with a reputation for handling their currency very badly might decide to use another currency like the U.S. dollar to increase stability of their economy and restore investors’ confidence. In both cases they expect the benefits of shared currency to outweigh the disadvantages of not being able to set their own monetary policy.
Sometimes countries go half-way: they peg the value of their currency to that of a foreign currency so that the exchange rate is predictable (e.g., our central bank will always pay you 50 pesos for one U.S. dollar no matter what happens to the dollar), but they could still change their mind and end the peg later.
Depends for who, for us is not important, for the people in the government trying to rule over you, it is, since if they control the money they basically have a grasp on your livelihood.-
That’s why the government shut down Zucks plans of establishing the Facebook Libra for example.-
There are a handful of countries that actually use US dollars as currency. Panama use the Balboa, which are just US dollars, although they mint their own coins.
Having your own national currency means you have control over the monetary policy.
Having a global currency means every country would have a single economic policy regardless of their situation.
If country A is in a deep recession and country B is suffering high inflation, they would need to have two different monetary policies to address their issues.
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