For no particular reason I'm going to talk about the Euro today. As a firm believer in the European project and more widely in Internalism I was greatly in favour of the creation of the Euro and I would actually go further and suggest that a single world wide currency would be even better. I have never understood the political or economic arguments in favour of having separate currencies. If a single currency can accommodate California and Alabama or Moscow and Kamchatka then why couldn't it accomodate Luxembourg and Haiti? The main purpose of money is to serve as a medium of exchange. It's easier to have a common currency than to have to barter goods and services for every transaction. If one of the purposes of money is to facilitate transactions between people then I don't see how having different currencies makes things easier. The average daily trade in foreign exchange is over $5 Trillion per day which if we assume a very low cost of 0.01% (1 cent per 100$) represents $650 Billion per year. That would be enough to cancel the foreign debt of the 83 poorest countries in the world.
JM Keynes actually proposed a global currency at the bretton woods conference, but world leaders opted for the US dollar instead.
ReplyDeleteIn a way the Euro could serve as a pilot program for what a global currency might look like. The Euro led to increased Euro area trade, but without a mandate for fiscal transfers, as there are between California and Alabama, or Bavaria and Berlin, less competitive states lost out. Italy was one of the most prosperous European countries before it joined the Euro, because it had monetary independence. Germany benefited massively from the Euro, and France would have too had it enacted pre-emptive economic reforms.
I'd love to see a single currency world, but it would require handing over national economic sovereignty to a global government. And that's no easy feat