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I am trying to understand the point of different currencies, if all currencies are just an factor away from each others, i.e. $1 Canadian = 0.7 euro = 0.75 USD and so on. What prevents a global currency? For sake of argument let's say everyone wants to switch to using the Canadian dollar.

Unless I am wrong that would mean that someone living in the USA with 100 USD would then have $133 Canadian. This would seem that they have more money now but the prices of American goods would go up accordingly. So if there was product that cost 10 USD, this person could buy 10. The new price would be $13.3 Canadian and the person could still only buy 10 items.

I am not trying to change the world with this. I simply want to know if I am missing something about the purpose of each country having a specific currency.

closed as off-topic by quid, NL - Apologize to Monica, Grade 'Eh' Bacon, ChrisInEdmonton, JTP - Apologise to Monica Mar 31 '17 at 18:09

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    The point of different currencies is the fact that different sovereign nations want to employ different economic policies and currency controls. – quid Mar 31 '17 at 17:35
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    But they couldn't change the money supply how they wanted to. – quid Mar 31 '17 at 17:53
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    @GarethShepherd it's completely political. Currency value is affected by decisions made by the central bank that controls the currency. Prints more, lends more to other banks, etc. The US will never cede its control of the ability to print dollars, so the US would never adopt the Euro for its currency, nor would the EU ever adopt the dollar for its currency. This is a political/economic question, probably not on topic here. – NL - Apologize to Monica Mar 31 '17 at 17:53
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    And for this matter, what's then even the point of having different countries or languages. – quid Mar 31 '17 at 17:54
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    @GarethShepherd I offered a brief explanation of monetary supply in my first comment above. When a country prints more money or loans it out more freely, that increases the monetary supply -> inflation -> decreasing value in exchange rates. I hope that helpful in moving you in the right direction. – NL - Apologize to Monica Mar 31 '17 at 18:41
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For one, the exchange rates are constantly in flux. Maybe today $1 Canadian = 0.75 USD but next week that may be $1 Canadian = 0.70 USD.

Each country is in control of their own currency. They are able to control the supply of the currency and are responsible for preventing counterfeit money from being produced. Every country could, of course, band together and agree to use a single currency (as is the case in the European Union). But then who controls the currency? As you can see this is quickly becoming a political problem.

So to sum up:

What prevents a global currency?

The independence and sovereignty of each country, not necessary exchange rates between currencies.

  • Ok, I like how you explained that. But what specific things prevent a system like the EU from spreading world wide? If you know about that I would really appreciate it if you added it to your answer. – Gareth Shepherd Mar 31 '17 at 17:50
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    If every nation wanted to join the EU and make a new "Global Union" they absolutely could. Most don't, though, because then they'd have to follow extra rules. This is why Brexit is happening: because costs of remaining in the EU outweighed the advantages, at least in the minds of the majority of Brits. – Nosrac Mar 31 '17 at 18:04
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Daniel Carson's answer is excellent and I agree with all of it. In addition I think it's important to point out that the same exact product may not have the same price or value in a different country. A great way to illustrate this is the price of a Porsche 911 in different countries, I use the Porsche example because the website makes it easy to look at the price in different countries.

It's not simply exchanging the currency between regions. There might be a lot of demand in one country or region that drives up demand. There might be importing tariffs or additional taxes. Many people restate international values by applying an exchange rate to give a frame of reference, but it's actually extremely rare to find the same product in a different country for the same currency normalized price.

Here's a couple 911 prices:

              List            Canadian
Country       Price            Dollar
-----------------------------------------
China       1,318,000         254,546        
Japan      13,091,000         156,288
US             91,100         121,181
Canada        101,300         101,300
  • Very good point but I still don't see that as a barrier to a global currency. If I have $200,000 Canadian then I can by the car anywhere but China and I can justify that by saying it much cost more to get the materials/shipping/tax. The name of the currency does not change how many cars I can buy. – Gareth Shepherd Mar 31 '17 at 17:58
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    If you don't see that as a barrier to a global currency then you have a fundamental misunderstanding of macro economics, money supply, and central banking. – quid Mar 31 '17 at 18:08
  • Close but no cigar :) – Gareth Shepherd Mar 31 '17 at 18:09
  • I have zero understanding of macro economics, money supply and central banking, that is why I am asking – Gareth Shepherd Mar 31 '17 at 18:10

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