Why can't the world be unified on a cryptocurrency?

Why can't the world be unified on a cryptocurrency?

Some people in the cryptocurrency community hope to have a global currency one day, and everyone is on the blockchain, freeing us from the control of the government and banks. Although I do think that the future of money is and should be encrypted, I don't think this special situation will happen at the touch of a button. It is unwise to use a single currency for all countries, except for the fact that the government may never let such things happen. It is unwise.

My uneasiness comes from the euro crisis that has plagued Europe in the post-recession period since the end of 2009. In my opinion, the misfortune of Europe has taught us something extremely important: the value of money can have a profound impact on the financial health of a country. Governments are well aware that a country that controls the exchange rate of the local currency can manipulate the supply of local currency to supplement the current economic situation. (As an example, please see China's currency response to Trump tariffs.)

The basic principle is that when the economy is not performing well, the government will often print more money to make the domestic currency cheaper than the neighboring currency. This has encouraged foreign investment, tourism and stimulated export markets. Under more favorable economic conditions, supply can be better reduced to keep prices lower and give economic members more purchasing power.

Because of the economic composition, a country may also want to manipulate its money supply. An economy that tends to export will perform better in the event of currency depreciation, and a country that needs to import more goods will benefit from currency appreciation. Like the European example, the UK traditionally has a strong currency, and most of the goods are imported; in contrast, Germany exports are large and therefore prefer a weaker currency.

The euro crisis is fascinating because we can see how a loosely-linked economy can cope with the use of the same currency in all countries, so that it cannot fully control its monetary policy. For example, Greece has always suffered a heavy debt burden. In 2016, their national debt accounted for 180.8% of their GDP, almost double the European average; the previous year, the unemployment rate reached a staggering 25%.

Greece's dilemma has several different sources, such as their special sensitivity to changes in interest rates, but if they have their own currency, it would be beneficial to depreciate sharply to achieve recovery. However, they cannot be linked to other European countries because of their fiscal policies, and many European countries will not benefit from a weaker currency. Therefore, Greece has a strong currency, which is very bad.

In contrast, due to the existence of member states such as Italy, Greece and Spain, the German currency is artificially weak relative to its prosperity, stability and strong economy. This is a good thing for them because they play the role of “producer” in Europe and second only to China in terms of net exports, ranking second in the world. Weak currencies make their products competitive in the international market.

The fact that European countries operate under the same fiscal policy, but they do not allocate aid from richer countries to poorer countries further exacerbates the complexity of the problem. Each country redistributes wealth internally through taxation, but does not provide assistance to other countries in the euro. If the United States operates in a similar manner, wealthy states like California or Massachusetts will not contribute to poorer economies like Arkansas, Mississippi or Puerto Rico. They are doing an important contribution to the health of the US economy.

Therefore, the EU has locked these member states into a sufficiently strong relationship that prevents individual countries from implementing customized monetary policies, but not enough to unite their economies. In contrast, the United States works well because states are governed by a strong government that manages national monetary policy and allocates aid from wealthy states to poor states.

Since the countries of the world do not operate under a single government, their economies are vastly different and have different needs. Therefore, it is obviously impossible to manage these economies with a single global currency.

I think the only viable option is if the value of a global currency is independent of fiat money and maintains an appropriate exchange rate between local, government currency and cryptocurrency. This will provide each economy with the necessary room for adjustment. Alternatively, each economy or government can establish its own cryptocurrency as the national currency. Of course, this is somewhat contrary to the purpose of blockchain technology, because it involves the government again.

It would be interesting to see some innovations in this area that would result in a highly intelligent, high-quality system that would be able to cope with the economic pressures of each country or region. With the technological advances and theoretical advances in computer science and economics, we may be able to build some kind of global currency. However, as far as we have it, we cannot expect to create a single global currency with cryptocurrency. (Bitcoin House)