Is a Single Global currency a good idea?

Global currenciesCurrently almost each country has its own currency. People who have to deal with two countries , for example me who at some point of time had to deal with US and India, need to keep on worrying about the currency exchange rates and the timing to change one currency into other, should it be a significant amount, in order to maximise my networth. Wouldn't it just be nice to have a single currency for the whole world? For example Euro is just one currency all over Europe. Currencies like French Francs, German Deutsche Marks, Italian Lira, Spanish Peseta, and later in the course Polish Zloty etc. all are being done away with. How about something like a "Global Euro"?

It turns out this is a really bad idea. The main point is that when two different regions have different government and different laws, it is best to have different currencies in order to 'delink' one region from the possible mismanagement of the other. Take two countries India and US for example. Just imagine the scenario that we had someone like G.W. Bush for another eight years, another eight years of wars and bail-outs and heavy increasing of US National Debt. In the present situation, this would just devalue the dollar against the rupee. Had both countries had the same currency, both US as well as India would have to pay for the mismanagement in the US, and ofcourse vice versa if Indian govt messes up.

So the key point is: to have one global currency, we first need a global 'watchdog' for watching and having some control on what each region is doing. In europe there is European commission or European Union. Thats why it is possible and makes sense to have a single currency all over europe. Currently having a single global currency is just a naive impractical and a stupid idea.

Jan 20, 2009

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