In my essay, I consider if all countries should use the same currency. I concede that there are reasons countries need and require different currencies, but the EU has shown us that numerous strong and weak countries may operate with a single currency. To allow countries to use just one currency, I suggest using currency as a trading medium at its most basic and nothing more. In that scenario, a move from multiple currencies to just one currency would require a less painful transition.
There are two big reasons why turning to a single currency may be too painful for some countries. Firstly, we lose Forex as a way of making money. Secondly, the strength of a currency is sometimes a key factor in a country’s economic output and health. I suggest that currency strength is rendered moot so that money is nothing more than a trading medium. In this case, we would see prices and job wages change according to the power of each country’s economic power. If proper trading regulations were set in place and unified, then one country would be unable to legally exploit another for things such as cheap labor or cheap prices. (Spencer, 2012).
Prices would adjust if currency strength were not a factor if there were only one currency. I contend that we remove all elements of currency strength. Doing so would be very easy in a situation where all countries are using the same currency. If the strength of a currency was disregarded, then the world economy would require a lot of change, but in the end, we would see a world where prices and wages change based on nothing more than a country’s economic output. (Asongu et al, 2016)
People will no longer try to undermine currency if only one existed and currency strength was not an issue. There are people who try to undermine currency strength for their own gain. Some people wish to make more money exporting, and others are trying to undermine a currency so that they may sell other currencies. The trick is to get into debt in one currency by buying another currency, you then undermine your currency until its value drops, you sell your foreign currency, pay off your debt and reap the gains. Such techniques would be a thing of the past in a world with one currency. (Bolton, 2016)
Countries cannot manipulate currency strength for their own gain in a world with just one currency. China has long kept its currency weak so that it is more attractive to foreign investors and buyers. In a world where only one currency exists and where currency strength is not a factor, then countries such as China would suffer when they weaken their own currency rather than prosper. (Acocella and Tirelli, 2007)
Countries will no longer have to rely on the strength of their currency. For example, when the UK decided to leave the European Union, their economy rocketed because their currency was weaker. It meant that businesses in the UK received more of their own currency when they sold products overseas. Such occurrences are unfair because countries with strong currency are punished when selling abroad. (Bergin, 2008).
The final and most obvious reason why all countries should have just one currency is because there will be no need for currency exchange rates or fees. The entire industry would be removed and millions of businesses and people would save billions per year in rate exchange losses and exchange fees.
Conclusion
Once again, my idea is also allied with the idea of removing currency strength as an economic factor. Creating a world with just one currency and a world where currency strength has no influence is a big task, but the benefits of such an idea would have many benefits, especially when you consider things such as world debt and fair trading ethics.
Bibliography
Acocella, N. and Tirelli, P. [2007], ‘Monetary conservatism and fiscal coordination in a monetary union’, published in: ‘Economics Letters’, 94(1): 56-63.
Asongu, Simplice; Nwachukwu, Jacinta; Tchamyou, (2016-08-01). “A Literature Survey on Proposed African Monetary Unions”. The Journal of Economic Surveys
Bergin, Paul (2008). “Monetary Union”. In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: The Library of Economics and Liberty.
Bolton, Sally (10 December 2001). “A history of currency unions”. guardian.co.uk. Retrieved 29 May 2017
Spencer, S. (2012, February 01). Three common currency-adjustment pitfalls. Retrieved June 12, 2017, from http://www.journalofaccountancy.com/issues/2012/feb/20113891.html
