If you have ever traveled abroad, you will know that not all countries use the same currency,
I mean basically everyone knows that.
I might make my YouTube money in US Dollars, but now that I live in Germany I spend that
money in Euros, and yet despite the Euro I won’t have to travel far to use a different
currency altogether, be it Danish krone, Swedish krona, British pounds, Polish złoty, Czech
koruna, Romanian leu, Turkish lira, or whatever else I can find myself using after a 19€
easyJet flight.
Although collecting foreign currencies may be incredibly fun, after the umpteenth time
visiting a particular country, converting to different currencies can get a little inconvenient,
and also annoying to remember that paying, for example, 10 ringgit for a Shawarma in
Malaysia is actually not a complete ripoff.
This is exactly why the Euro was put into place, so what would it be like if we had
a single currency, not just for half of a particular continent, but for the whole world?
So first, why do we do this to ourselves?
How did this get started?
Well it’s much the same reason as to why countries have different languages, cultures,
or even power outlets; basically, there was no original global currency.
What I mean by this is that the idea of a standardized currency was an idea that had
come about independently in numerous cultures over the millennia.
If you watch educational YouTube channels as much as I do this is probably a story you’ve
heard numerous times already so I’ll keep it somewhat brief, in the beginning of human
civilization people traded using a simple bartering system, literally just trading a
good you made for a good someone else made.
The problem with this of course is that, if you sell bread and I sell cows, it’s very
inconvenient if I only wanted two loaves of bread, since two loaves are not worth a whole
cow-- especially considering cows back then would have been more useful alive, which in
this case the process of denomination generally doesn’t allow for-- and of course it’s
possible you just don’t want cows.
In response to this fairly universal problem, just about every complex civilization developed
some sort of common material for everyone to trade, be it metals, sea shells, emeralds,
or even sheets of paper.
These were better than using life forms because of their whole non-perishability thing, but
also allowed traders to actually trade with precise amounts.
So if I gave you this exact amount of gold for this exact amount of bread, you can now
be certain that said amount of gold will buy you this exact amount of… wool, or whatever
else you’re into.
This was such a good idea that different cultures all had this idea independently of one-another,
and so developed different standardizations, since there’s no intrinsic value in gold
or sea shells so you can kind of use whatever’s around that’s somewhat rare, which with
a few slight tweaks pretty much brings us to today (okay, well actually quite major
tweaks, but still).
This means that transactions are more or less the norm in international trade, which can
be incredibly tough to deal with, so could we even establish a world currency to circumvent
all this?
Well first, there is one thing I haven’t mentioned, something both important to understanding
why some countries might be reluctant to switch over to a global currency, and yet another
annoyance to travelers everywhere: the value of currencies fluctuate in comparison to that
of other currencies, as in one day 1 US Dollar might be worth 4.22 Malaysian Ringgit, and
then the next 4.39, and then perhaps something really bad happens in Malaysia and the value
of the Ringgit completely plummets.
This can actually be useful to countries which control their own currencies in a time of
financial instability, since they can either slow down inflation to deflate their currency
so their citizens have more purchasing power, or speed it up to shrink the currency and
make the country more attractive to foreign visitors.
To perhaps help us answer this question, let’s look at the smaller examples the real world
has already provided us.
There are quite a few multinational currencies out there, the most famous of these is the
Euro, but many countries in central/west Africa use the CFA franc, and many Caribbean nations
use the East Caribbean dollar.
Also many smaller nations share currencies with other bigger nations, such as (not including
pegged currencies) the US dollar, Australian dollar, South African rand, Indian rupee,
and many others.
So how’s all that going for them?
Well currency unions naturally have their fair share of advantages and disadvantages;
smaller countries (at least those that don’t have the luck of literally being Singapore)
can use a more competitive currency, exchanges become easier, and they could help weather
a financial disaster, however they generally cannot dictate their own monetary policy,
and just because one of these nations is booming doesn’t necessarily mean the others are
too.
Perhaps the best example we can take for both sides of the coin is Zimbabwe.
In 2007 they famously entered a period of hyperinflation, where the value of the Zimbabwe
dollar plummeted to the point where prices doubled every 24 hours, resulting in the Zimbabwe
dollar being redenominated three times just to remove all the extra zeroes.
By the end of this, one Fourth Zimbabwe dollar was really 10 septillion (10^25) First Zimbabwe
dollars.
Shortly afterward Zimbabwe started using foreign currencies like the Euro, British pound, and
especially the US dollar, which has worked to stave off hyperinflation, but has of course
not allowed the country much independence in its finances.
As Europe has had to deal with, creating a kind of one-size-fits-all currency-- while
certainly not impossible-- is still incredibly difficult without careful financial decisions,
which probably explains why even the Eurozone has strict economic requirements for a country
to enter.
The Euro of course has also famously struggled in its adolescence, it’s become a somewhat
more stable currency recently, but its value was deeply threatened by the Greek economic
crisis.
In contrast the US Dollar is perhaps the safest currency in the world and by far the most
widely traded of any currency, pushing the Euro to a distant second, even though the
US also had various union-related troubles growing up (more about that in a possible
future video).
This is because the US can be classified as an optimum currency area, where an area is
so politically and economically linked that it wouldn’t make sense for the states to
have different currencies, like in the colonial era.
Thus the only way to truly circumvent these economic problems would be to unite not just
the currencies, but also everything else in the world.
So basically the best pros of a global currency-- aside from all the benefits for tourists and
business travelers-- would be no more Zimbabwe-like scenarios, but the downsides would include
possibly more Greece-like scenarios.
Also currencies couldn’t be traded for a profit on the market so… not stonks.
There‘s one more pressing question that would need to be addressed though, especially
regarding inflation and interest rates: who would control this currency?
A global currency would be a vast responsibility for any one group to take, especially regarding
finding a way for it to fit economies from the US to Turkey to Madagascar.
Overall I‘m not saying this would be a bad idea, far from it, but whoever‘s in charge
of organizing this should understandably tread lightly.
Thanks for watching and thanks to my friend Barris from the French history channel This
Is Barris for helping look over this script.
Now for my weekly barrage of different things I want you to do even though you probably
won‘t, go subscribe to his channel, join the Discord server, support the channel on
Patreon, like this video, and subscribe to KhAnubis to learn something new every Sunday.