what is preventing every nation from adopting a single universal currency? And wouldn’t the world be a better place if that happened?
In: Economics
This is part of the [Impossible Trinity](https://en.wikipedia.org/wiki/Impossible_trinity)
Countries want to be able to set their own interest rates to manage their inflation and growth(Sovereign monetary policy)
People want to be able to move their money wherever without paying excessive fees and taxes (Free capital flow)
And a fixed (or at least semi-stable) exchange rate is nice so that the value of goods between countries doesn’t swing wildly.
But if you pick two of these you cannot have the third(thus the Impossible part of the Trinity)
If every nation adopts the same currency then you have a fixed exchange rate(its 1:1 because its all the same) and now countries either cannot set their own interest rates or they must charge taxes on money going in or out of their country to even the odds. A big unified currency is good for the big players(it makes trade easier and reduces how cheaply poor countries can make things) but is terrible for the little guys who were used to inflating their way out of debt.
You can look at Greece for an example of what goes wrong with a single universal currency. Were it not for Germany and European banks pumping money into them to make up for the lack of Sovereign Monetary Policy they would have had to leave the Euro years ago
Latest Answers