How Realistic Is The Idea Of A One-World Cryptocurrency? 2
Now, if Greece was issuing its own currency, exporters would not have been as firmly stuck between the relative strength of the Euro and their high costs.
This is because a country’s exports get cheaper as its currency devalues (this is balanced by a rise in the cost of imports, which will drive up the cost of imported products).
This means that exporters might not have suffered as steep a fall off in revenues as they did by using the Euro, reducing the need to lay off as many workers.
If this is too confusing or abstract, think of a traditional currency as a pressure valve customized to the needs and idiosyncrasies of a particular economy. When too much economic pressure builds up, it can be released via devaluation, instead of blowing up the economy’s labor force.
Which brings us back to the plausibility of a crypto-one-world currency.
The issue at hand isn’t government irresponsibility with printing (even though central banks do not actually print money) and borrowing in fiat.
It’s whether or not a single currency, traditional or crypto, can act as a pressure valve that encompasses all of the economic peculiarities of the world’s countries.
If the Euro, used by 19 countries in 2021, and is the closest real life example of a modern day single currency we have, couldn’t account for Greece a decade ago, how can any currency account for all 195 countries in the world?
It can’t; economies are simply too diverse in their activities and levels of competitiveness for the idea to be plausible.
Similar to Greece’s experience in the Eurozone, uncompetitive economies using a one-world cryptocurrency will struggle against the deflationary effects of a currency that is too strong for its level of competitiveness.
Compounding matters is the fact that labor suffers the most during deflationary episodes, with massive layoffs the norm.
Without the “emergency release” option of a traditional currency, economic recovery takes place over decades instead of years (post bubble Japan is a good example).
This sets many workers back years in terms of lifetime earnings, and many give up looking for work altogether, resulting in the country’s workforce not only decreasing over time, but also losing relevant skills.
This obviously creates an economic headache, as over time the economy can no longer produce the goods and services the rest of the world demands, leaving the country trapped in the economic doldrums.
On top of this, the country will also have to deal with increasing levels of economic inequality.
As more and more citizens find themselves stuck outside the labor market and unable to find a job that matches their skills, they become trapped in a low (or no) income situation with no way out. This breeds resentment and over time can fester into social and political unrest.
As such, an economy’s choice of currency has far reaching consequences and second order effects, which are not all obvious at first glance.
While the idea of a one-world cryptocurrency (or a one-world fiat currency) is seductive in its simplicity, it really doesn’t serve anyone’s economic interest in the long term, except maybe for the folks promoting their version of it.
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