[Bastian]

Hi there, it's my first post but i'm a long time lurker on this site but i never had anything usefull to say lol.

But this is a question i wondered for a long time.

If the entire world pays with the same money that means that if the currency loses value it's not just one country that has to suffer but the entire world and that it's the interest of the entire world to keep the currency strong and not losing any value.

The currency should be backed up by gold and silver so it will never inflate.

so in my opinion it would be a good thing if we have one world currency backed by gold and silver.

I would like to know other people opinions why they think it's good or why they think it's bad ^^

[MadScientist]

one world currency implies one world government.

one world government implies concentration of power to one or a few people.

What if they are evil people?

It's hard for me to imagine a world run by one person to be a better place. Unless it was me of course lol. I'd have us all projecting enough love and positive emotions into our lovely mother earth to last a thousand years!

I sure hope everyone else votes no too. One World Gvt = trouble.

[Bastian]

well yes i'm against a one world goverment too and i doubt it will ever happen.

every country needs to keep their soevereignity

but technically there already was a one world currency and that's gold and that's been replaced by the dollar because it's been considered as the world currency now.

but we all notice that the dollar is failing maybe it can come back up but if it doesn't something needs to replace it i think

[mlit]

I think Europe currently has problems with one currency as it is harder to control inflation / boom / recession. One country may be experiencing inflation and boom times and require rasing the interest rates while another is experiencing the opposite.

[LoneSnark]

If there is only one currency then what incentive do the managers of the currency have of not inflating?

In the opinion of many economists, the optimal outcome is a world of several competing fiat currencies which predominantly describes the world we currently enhabit.

If you think dollars are losing value, then trade them in for Euros. Don't like Euros? Buy some Rand.

It is startling how stable modern currencies really are and the rise of price stability is oddly correlated with the scrapping of currency controls and exchange rate rigging in the 70s. As history has shown for the past half century, whenever market speculators go up against a central bank or currency board, the speculators always win. This would no longer be the case under a one world government, as there would no longer be any competition.

I think Europe currently has problems with one currency as it is harder to control inflation / boom / recession. One country may be experiencing inflation and boom times and require rasing the interest rates while another is experiencing the opposite.

This problem occurs between any two regions with a hard fixed exchange rate but changing factors of production, which includes not just between U.S. states, but individual counties within states. Some economists have even tracked this occurance between neighborhoods within individual cities.

[Bastian]

I think Europe currently has problems with one currency as it is harder to control inflation / boom / recession. One country may be experiencing inflation and boom times and require rasing the interest rates while another is experiencing the opposite.

That's also true. but the greater concern needs to be Inflation if i have choose between Recession or Inflation i choose inflation.

I'm not an economist or anything like that, but since the economy is so bad i'm interested in learning more about it

[Bastian]

Loneshark i completely agree with you on that. ok maybe it's not smart to go for a one world currency.

All different currencies should be backed up by gold then? but doesn't that mean if the dollar and the euro are both backed up by gold that the dollar and euro have the same value?

let's say the dollar recovers and you get for 1 euro = 1,25 dollar

and they are both backed up by gold. for 400 euro you get an ounce of gold and gold stays the same it might differ sometimes but eventually it goes back to 400.

that mean you need to pay 500 dollars for an ounce of gold

doesn't that mean that gold is fixed and stays the same value and 1 euro will always be 1,25 dollar?

let's say europeans earn 1000 euro a month then that means that americans have to earn 1250 dollar to get the same standard of living then Europeans.

doesn't that mean that if all the currencies keep the same value that there is no difference then having a one world currency?

[Tyler_JC]

Mundell-Fleming Model



There are three things that make up the so-called Impossible Trinity or Unholy Trinity:

1. Fixed Exchange Rate (example would be Saudi Arabia's dollar peg).

2. Free Capital Flow (example would be George Soros and the other financial wizards zipping money around the planet at lighting speed in order to take advantage of currency fluctuations)

3. Sovereign Monetary Policy (example would be the US Federal Reserve Bank's control over the US money supply and thus the US economy)

You get to pick two of those.

A one world currency with free flow of capital means that no individual country or collection of countries would be able to control their own economic destiny. Budget deficits would need to be outlawed, interest rates would have to be fixed at a global level, and countries with overheating or contracting economies would be unable to fix their situation on their own.

In the modern European Union with free capital flows and fixed exchange rates, the individual member states must sacrifice their economic independence. The result is that some countries (Spain/Ireland) had overheating economies while other countries (Italy/France) suffered from lack luster economic growth.

So let's assume that you are now the World Central Bank Chairman.

What should the prime lending rate be?

I wouldn't be able to answer that question either.

[MrMambo]

I kind of like the idea of having a moderate monetary inflation as it will erode static reservoirs of pure capital.

As long as inflation levels are not above 15-20% per year and generally wages follows the inflation its not half bad. Some indications shows that the most rapid sustained real economic growth has occured in countries where inflation has been close to 10%.

Banks are the institutions that has the most to fear from high inflation alone. Rich people who only store wealth in bank deposits also loose out on high inflation. And if wages don't follow inflation than regular people loose out on inflation, but that doesn't need to be the case. In deed real wage growth has a tendency to go alongside inflation.

If you have aquired a bunch of money through luck, inheritance or even the occational self made man/hard work kind of way it doesn't do too much good just sitting in a vault of a bank.

The best is to reinvest the money in some sort of productive activity that generates more valuable products/services/infrastructure/culture etc.

And if you know for sure that paper money is loosing its value over time you would be more inclined to reinvest the money rather than just pile it up in a bank vault.

Monetary wealth can always be stored quite robustly in gold, silver and land. So if you are desperate about accumulating you could always do that whatever currency regime there might be, unless of course the accumulation goes to far so that there is practically no land left for other people to live on.. then there ought to be a revolution where people fight for controll over land for the benefit of the general population.


BUT

On the other side the idea of a gold standard for all money or a single global currency gives the desired quality of predictability and universality so its a tradeoff between two opposing monetary styles. What is for sure is that having the abstraction of real value into money is beneficial for human activities.

[Bastian]

ok thx for explaining that Tyler_JC.

But does it also mean the same when the currency is backed up by gold cause technically you don't need a world bank then right?

[LoneSnark]

That would only be true if all the paper currency was withdrawn and replaced with gold coins for all denominations. Otherwise, there would still be an incentive for the bank to issue too many paper notes for the gold contained in their vaults, as occured between 1913 and 1928. And, since the standard would be enforced by law, such as by outlawing the holding of gold by individuals (as FDR did in the 30s), there would be no mechanism to punish this behavior through pre-emptive devaluation, causing it to fester until one day when there is not nearly enough gold to cover the paper money in circulation. As a result, speculators will launch a devaluation attack on the currency, as occured in 1929 and 1930, until the bank gives up and suspends specie payments, breaking the link between the paper and the gold remaining in its vaults, as occured in 1933 (not sure of the dates right now).

However, as hauling around gold coins for every transaction would work, governments could still debase the currency (mix in some other metals), leading to the same implosion above. But, perhaps more importantly, gold is not just a store of value, people actually use it for productive purposes, and fluxuations in commodity markets (Gold at $1k an ounce) would result in a severe shock to the financial system if the two were forcibly tied together. For example, you may think that prices have been unstable lately, but if tied to gold, prices would have fallen by 2/3rds between 2003 and 2007, and almost doubled in just the past few months, with substantial devastation for the economy at large.

[Bastian]

That would only be true if all the paper currency was withdrawn and replaced with gold coins for all denominations. Otherwise, there would still be an incentive for the bank to issue too many paper notes for the gold contained in their vaults, as occured between 1913 and 1928. And, since the standard would be enforced by law, such as by outlawing the holding of gold by individuals (as FDR did in the 30s), there would be no mechanism to punish this behavior through pre-emptive devaluation, causing it to fester until one day when there is not nearly enough gold to cover the paper money in circulation. As a result, speculators will launch a devaluation attack on the currency, as occured in 1929 and 1930, until the bank gives up and suspends specie payments, breaking the link between the paper and the gold remaining in its vaults, as occured in 1933 (not sure of the dates right now).

However, as hauling around gold coins for every transaction would work, governments could still debase the currency (mix in some other metals), leading to the same implosion above. But, perhaps more importantly, gold is not just a store of value, people actually use it for productive purposes, and fluxuations in commodity markets (Gold at $1k an ounce) would result in a severe shock to the financial system if the two were forcibly tied together. For example, you may think that prices have been unstable lately, but if tied to gold, prices would have fallen by 2/3rds between 2003 and 2007, and almost doubled in just the past few months, with substantial devastation for the economy at large.

yes but that is a crime in my opinion, if gold was worth 200 dollars 50 years ago it should we worth 200 dollars now also and if you had 1000 dollar 50 years ago it should be the same value as now.

but i guess that's just wishfull thinking

[pedalling_faster]

i said 'bad', because it evokes images of EU or UN-issued
currency.

but like i guess some people have pointed out, gold and
other PMs are effectively a form of world currency. (the
problem is, if you carry PM's in a foreign country, you need
to A/ not get robbed, and B/ get decent exchange rates,
not so easily done.

but i could handle paying for some good Greek Souvlaki with
a silver quarter. i could even make some decent stuffed
grape leaves using walking stick cabbage !

but i wouldn't call gold a 'good' foreign currency. it's something
like 246 tons of cyanide for every ton of gold produced. the
production process is nasty for the environment. in other
words, not sustainable.

[Tyler_JC]

I don't know how you shift from a paper currency to a gold based currency without some kind of jarring readjustment.

Globally there is enough gold to give each person about 25 grams.
That's less than one ounce per person! A gram of gold is worth $26.50 so the total gold currency per person is a mere $662 at current prices.

Priced in Euros, we only have 450 Euros worth of currency per person.

How could you possibly use that as a currency?

It gets worse. Most of the world's gold is currently in the form of jewelry. How many wedding bands and works of art are we planning on melting down?

Gold prices would have to shoot up dramatically in order to begin to replace paper currency. But that would cause major economic distortions (lots of people panning for gold instead of working) and the resultant gold would be so valuable that theft would be impossible to stop. Imagine being able to skim a tiny little sliver off of a gold coin and buying a new sofa with it.

Basic scales wouldn't be able to pick up the difference (and do we want to encourage everyone to spend thousands of dollars buying new scales?).

There are just too many problems with having physical gold as a common currency.

Gold, while valuable as an inflation hedge and a possible small scale currency, could never replace paper money as a medium of exchange.

A global paper currency has other problems that I could outline if anyone's interested.

[mattduke]

[stream]http://mises.org/multimedia/mp3/audiobooks/rothbard/money/2.mp3[/stream]

[idiom]

We could use leaves as currency.

But then we would have to burn down all the forests to stop inflation.

[Starvid]

It's a bad idea. Not because t implies a world government. Clearly, the Eurozone nations do not have a single government.

The good thing with having your own currency is that you can put your interest rate at the optimum level for your own economy while a world interest rate would put it on the level where it is best, on average, for the entire world.

This is like having the same thermostat setting in all houses on the entire planet, no matter how they are insulated or if they are located in the Congo or in Greenland.

For a single currency to work the different economies must be tightly coupled, that is, have the same level of insulation to tolerate having the same thermostat setting.

If they do, having a common currency is a good idea as it lowers the barriers to trade and hence increases our total collective wealth and standard of living.

But the world doesn't look like that today.

[MrBill]

In a world of freely traded currencies, and no capital controls, a single world currency is not necessary. Just sell and then buy whatever currency you need at the prevailing market rate. Then if you feel the burning desire to buy gold, fine, no problem either. Want a piece of property? Sell your paper currency and buy land. Where is the problem?

MrMambo wrote:

As long as inflation levels are not above 15-20% per year and generally wages follows the inflation its not half bad. Some indications shows that the most rapid sustained real economic growth has occured in countries where inflation has been close to 10%.

I don't believe you have any idea what you are talking about? Rapid sustainable real economic growth and price and wage inflation of 15-20% per year? In other words prices, costs and wages doubling every 3-5 years in a world where real GDP growth is approximately 3-4% p.a.? That is just too funny! ; - ))

[mattduke]

Yes a single global money would be great. What we have today is international barter. We used to have a single global monetary system: the gold standard.

[Tyler_JC]

In a world of freely traded currencies, and no capital controls, a single world currency is not necessary. Just sell and then buy whatever currency you need at the prevailing market rate. Then if you feel the burning desire to buy gold, fine, no problem either. Want a piece of property? Sell your paper currency and buy land. Where is the problem?

MrMambo wrote:

As long as inflation levels are not above 15-20% per year and generally wages follows the inflation its not half bad. Some indications shows that the most rapid sustained real economic growth has occured in countries where inflation has been close to 10%.

I don't believe you have any idea what you are talking about? Rapid sustainable real economic growth and price and wage inflation of 15-20% per year? In other words prices, costs and wages doubling every 3-5 years in a world where real GDP growth is approximately 3-4% p.a.? That is just too funny! ; - ))

I saw that quote and had the same reaction.



The data tends to indicate that an inflation rate of 2-3% correlates to a real GDP growth of 3-4%.

Rapid inflation is extremely distorting for an economy. There's a reason that most of those high inflation quarters were also low growth (or outright recession) quarters.