All Countries Should Use the Same Currency

Thanks DoctorDeku for accepting.For this debate, I am going to concentrate onthe Euro as my example since it is the closest thing we have to an universal currency. Any and all examples of problems and difficulties come from Europe and the Euro. Countries rely on various economic tools to direct their plan for economic growth. Each country has an individual set of needs and wants that should be satisfied. However, with a global currency, this customizable economic plan is impossible. A single monetary union that serves a single interest to all the worldis impossible. The world is a hodge-podge of different countries; it is a “patchwork of sovereign nations with distinct languages, cultures and histories that have more often been at war with each other than in search of common ground”. Each country has its own economic problems that require individualized solutions.[1] This causes many problems as all countries must have one monetary policy. Take for example interest rates. The ability for Governments to set interest rates on their own is a vital tool to combat economic problems. Interest rates are monetary policies set by the Government to combat economic problems. Raising the interest rate slows inflation, while lowering the interest rate helps end a recession, and every country has a different interest rate to satisfy its economic needs. “By adopting a single currency, Euroland governments will lose control over a vital instrument for managing a national economy – the power to mint money and influence its value by adjusting interest rates."[1] Or take the example of exchange rates. Exchange rates are also very important to the well-being of an economy. Countries set rates depending on their economic conditions. If a country is experiencing a recession, it might start exporting more and importing less so as to create a trade surplus and raise GDP. As with interest rates, a world currency takes this vital power away from each country. "Monetary union has shackled together nations with vastly different economies, depriving them of an independent monetary policy that can help them through rough times. The interest rate and exchange rate that serve Germany also have to serve Spain, though that country has more than four times Germany’s joblessness."[2] The effects of all this are economic problems. "That presents these countries with some painful choices they didn’t have to deal with back in the days when they could devalue their local currency. Italy, for example, faces some stark choices, according to a 2006 report by the Center for European reform, a London-based think tank. It can continue to muddle along as the slowest growing economy among euro countries. Or it could boost productivity, chiefly by cutting wages. Or it could leave the euro, devalue its debts and create its own currency. Doing so, however, would make it much more difficult to borrow. Other euro countries with high debts face similar downward spirals. Those debts increase costs, forcing tax increases or spending cuts. Cutting future borrowing costs means raising productivity — either through layoffs or wage cuts or both. None of those choices is likely to win much support on Election Day."[3] In addition to economic problems, a single currency also debt. Governmentsshould beable to control borrowing through economic indicators. However, as with everything else,a world currencytakes that power away from countries. "Before the monetary union was put in place, large fiscal deficits generally led to higher interest rates or declining exchange rates. These market signals acted as an automatic warning for countries to reduce their borrowing. The monetary union eliminated those market signals and precluded the higher cost of funds that would otherwise have limited household borrowing. The result was that countries borrowed too much and banks loaned too much on overpriced housing. This caused “rapidly rising ratios of public and private debt to GDP."[4] In the Eurozone, in just five years, Debt-to-GDP ratios have gone up around 12%, and even more forsome countries (for example the PIIGS). In conclusion, "Diversity means different strokes for different folks. But a common currency means a common economic policy, which is turning out to be impossible for groups of people with habits as different as those of the Germans and those of the Greeks."[5] I will end with a hypothesis: 1) A global currency takesaway the power for countries to dictate their individualized economic policies. 2) This causes problems in the countries where that global economicpolicy is not what they need. 3) Therefore, there should be no global currency. Sources [1]: Cooper, Mary H. "European Monetary Union: Will It Stabilize Prices and Boost Global Trade?" CQ Researcher 8.44 (1998). pp. 1025-48 [2]: http://www.nytimes.com... [3]: http://www.msnbc.msn.com... [4]: http://www.nber.org... [5]: http://www.pbs.org...