Before we begin, some definitions are in order, for the purposes of clearly delineating the scope and hence applications of this discussion.

Note the use of the term “traditional” currencies as opposed to “fiat”. What’s the difference?

For our purposes, a “traditional” currency is one that is associated with a particular country, and fiat is government backed currency associated with a particular country. In other words, fiat, here, is a subset of traditional currencies.

Why the need to draw this distinction? Because geography really matters.

The geography of a country pretty much determines what its main economic activities are; a nation blessed with natural resources and access to deep coastal waters will gravitate towards the extraction and export of those resources. Australia is a great example of this.

On the other hand, a country with little to no natural resources will have to produce and export something else.In our modern economy that would be financial services such as wealth management and capital markets expertise. Hong Kong, Singapore, Luxembourg, Switzerland all come to mind.

What does this have to do with a crypto-one-world currency?

Consider that, at any one point in time, different economies will have different economic conditions, because of the variety of economic activities they undertake. That is to say, a country focused on digging up stuff from the ground and selling them is exposed to different economic cycles than a country whose economy is focused more on the provision of services.

As such, each country needs its own currency to reflect its own specific set of economic conditions in order to keep its economy in balance.

Greece’s experience with the Euro during the continent’s debt crisis provides a good example. As borrowing costs for the Greek government skyrocketed from 2010 – 2012, global investors refused to lend them any more money.

This exacerbated already poor economic conditions, driving the country into a deflationary quagmire.

If Greece wasn’t using the Euro and had its own currency, the FX market would have driven its value much lower.

While this sounds like a terrifying prospect, and in many ways, currency volatility is terrifying (just ask the Argentines and the Turks), it is exactly what the Greek economy needed to rebalance itself and regain some measure of competitiveness. 

Unfortunately for the country, they couldn’t do so because of the Euro. 

This is most easily seen from the perspective of Greek exporters. As economic conditions deteriorated, the strength of the Euro meant that Greek exporters’ sales fell off a cliff even though their costs did not change.

Greek exporters simply were not competitive enough to be able to stay in business with the Euro trading at the levels it was back then.

Consequently, the only course of action they could take to survive was to lay off their employees. This in turn led to mass layoffs and all the attendant negative second order effects.

What would it have been like if Greece had control of its own currency?

To be continued…