like the fact that $100 in jamaica is like $10 here & etc.. why couldn’t we all use the same currency? or not even the same currency specifically but like have $10 here be the same thing as $10 in canada or $10 in africa etc etc.
In: Economics
u/Fruit522 didn’t seem to actually answer your question (that being why there isn’t a single global currency). While I imagine there are many reasons for it that I’m not knowledgeable enough to speak on, one simple reason is that it’s simply not practical.
Let’s imagine that all countries must use the most valuable currency, the kuwaiti dinar which converts to about 0.30 per US dollar. The poorest countries would have a hard time using this currency because there isn’t enough divisions in it. In many poor countries certain products cost less than 0.01 of a kuwaiti dinar or even less than a penny USD. The “minimum price” of all goods would be rather high for them.
Now imagine if all countries must use the least valuable currency (not counting countries that are unstable), the iranian rial which converts to about 42,070 per us dollar. Developed countries would instantly have to us Zimbabwe-esque 400,000 rial bills as the equivalent of ten bucks. Paying the bill at a restaurant in cash would probably need more cash than your wallet could hold unless there were big value bills.
Of course this problem doesn’t actually apply anymore if we abolish the use of physical money and opt for electronic payments for all purchases. This would allow any amount of divisions and no one would care if they had inflated values because it’s just numbers and not physical ‘stuff’ to carry around.
That’s just one problem, I’d be happy if someone more knowledgeable could chime in with more.
Currency developed as a way to trade with people without having to exchange goods every time. Each civilization/culture comes up with their own currency, ranging from precious objects like salt and gold to government backed standards like coin and paper.
Today, $1 in the US is still $1 all over the world, but that can be exchanged for an appropriate amount of local currency.
The whole point of currency is to be in charge.
To control it all.
Every country wants to have that power
Having its own currency allows a country (either the government or the central bank) to control the economy to some extent. The government can issue extra money in times of economic downturn (like now) to stimulate the economy. The problem is that this causes inflation, because there is more money around. If there was one currency then every government would have to agree to do that, which is not realistically going to happen. Even within the Eurozone there is disagreement between certain Southern European countries that have a history of devaluing their currencies (issuing extra money) and notably Germany that does not wish to do so.
Separate currencies give each country some control over how they manage their economy. The government can raise (print more) or lower the amount of currency in circulation, this can affects foreign exchange rates, loan rates, etc.
Europe couldn’t even do the Euro properly… you’ve got countries with huge economies (Germany) that end up needing to bail out more mismanaged countries (Greece). Whereas before the Euro Greece would have just started printing drachmas.
I don’t think you are going to find a very satisfying ELI5 to this question. The real answer has to do with the idea that different countries have different systems of government, different education levels, different levels of productivity, different levels of industry, and so there is a benefit to having countries with their own economies where currency helps track how money flows between those different economies.
If there was only one currency there would really only be one global economy and that would make it very difficult to figure out how much an apple should sell for in Guatemala and why that price should be so drastically different from New York. You would naturally want apples to flow out of low price areas to high price ones but that would mean Guatemala doesn’t get any apples. We don’t want that outcome.
It is a horribly complicated question.
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