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We see the problem of coincidence of wants here with regard to currency transfers, and the real effects of attempting to alleviate it. National currencies just

We see the problem of coincidence of wants here with regard to currency transfers, and the real effects of attempting to alleviate it. National currencies just don't make sense in a globalized economy.

madsbuch 3y ago
Why not? We have this notion that currency is managed in a super-political way. However, there is everything political with currencies and currency management. It is literally the difference on depression and labor shortage. For me, it is weird that this responsibility is deferred from political processes and the democracy. If a sovereign country wants to own its own politics, it also need to own its own currency.
- brnt 3y ago
  Yes, but at the same time nobody exists in a vacuum, especially not small countries like Denmark in highly globalised economies. Collaboration on something like the Euro makes small countries more powerful and effective, and thus more sovereign, compared to adhering to some technical definition of sovereign and being all the more easy to ignore or manipulate by global and/or much larger economies. For the small ones, cooperation bring power, it does not take it away.
  - madsbuch 3y ago
    > Collaboration on something like the Euro makes small countries more powerful and effective, and thus more sovereign ... Effective, yes – just like a single party system is more effective than having multiple parties and democratic processes. more sovereign – how? I really can't see how Spain is more sovereign managing their unemployment issues when they can not control supply of their own currency, and thus investment?
    - brnt 3y ago
      No, nothing like a single party system. Or are you saying a nation only fighting for itself is like a single party system? Control = power x influence. The argument was that more control can be had through having a local currency. I think, for smaller countries, more control and thus more sovereignty is had through teaming up, because the cooperation is (at least in the case of the EU) democratic, and is a tool more powerful than any national tool ever could be, and therefore control is larger.
- friend_and_foe 3y ago
  Ideally, currency should just exist and people should pick it based on how well it suits their needs. National currencies are fine in an environment where most economies are mostly domestic, because the effect of import and export on currency availability and foreign currency exchange is miniscule. This was the environment when these national currency schemes were devised. In a globalized economy, every country has trade imbalances which means they all need to have foreign currency reserves, adjust their reserves when economics change on the ground and adjust interest rates, this is a massive overhead for every country in the world that doesn't need to exist.
dumpsterdiver 3y ago
> National currencies just don't make sense in a globalized economy. If that were true, then you would happily trade your American dollars for rubles. Because it just doesn't make sense that they should be valued differently, right?
- LadyCailin 3y ago
  That’s certainly not something I would want to do now, but let’s assume there already was only one currency. Would Russia or whatever one country, be able to single-handedly tank the worth of the global currency? I am not an economist, so this is a genuine question.
  - dumpsterdiver 3y ago
    I'm not an economist either, but my armchair take is that the value of a particular currency depends very much upon the perception that the entity who prints the currency will maintain the status quo (i.e. they won't unexpectedly go bankrupt tomorrow). I believe what would happen with a single world currency is that it would generally be very unstable due to things like war, economic policy that proves disastrous for one or more of the members of that currency club, and as a result it would become untrusted. For instance, recall the US housing crisis of 2008-2009. This caused massive economic damage, and resulted in the United States printing money at unprecedented levels. Imagine now that the world utilized a single currency and one single nation faces a similar crisis. Would the world be expected to accept that the entire currency should be devalued due to excessive money printing simply because a small member country couldn't keep their shit in order? To frame this idea in a simpler fashion, imagine a single person named Scott who creates their own currency. That person hands out the currency when purchasing goods and services, and later on people can come back and spend that currency in order to purchase Scott's belongings. This works pretty well because Scott never hands out currency that he isn't able to back up with his belongings. Now imagine that there is a group of ten people who print their own currency, and you can use that currency to purchase the belongings of any of those ten people, regardless of who gave you that currency. Let's imagine that Scott is by far the richest person in that group, and Carlos is the poorest. When Scott hands out massive amounts of money for legitimate goods and services, that money can now be spent amongst any of the ten members. Let's imagine that someone decides to spend that money to purchase the belongings of Carlos. It turns out that Carlos does not have enough belongings to sell compared to the amount of money possessed by this spender. Nonetheless, all of Carlos's goods are purchased in one fell swoop (before inflation even has a chance to show itself), and Carlos now has zero belongings. Now imagine that instead of being a person, Carlos is a country. No one living in that country would be able to purchase goods anymore, because they were bought out. This would result in ridiculous inflation (meaning that the purchaser of those goods received a massive discount compared to the real value of the goods purchased in that place), and the country's economy would essentially be broken with no fix on the horizon as long as they continued to use that same currency. I think it's important to remember that currency isn't just printed paper, but a promise that you can redeem that paper for goods and services. When an entity is no longer able to provide goods or services then the currency that entity uses loses value because it cannot be trusted to be redeemable in some places. If that currency happens to be the common currency used by the rest of the world... well, sucks to be the rest of the world I guess. Keep in mind that when a country which uses their own local currency experiences economic problems, they can still purchase more reliable currency using their unreliable currency, and then purchase goods from that place reliably (even though that other country won't be able to do the same). Because the other country cannot reliably purchase goods from the economically compromised country, they will impose a very high exchange rate based on the risk that the exchanged currency will not be redeemable. This is the essential quality that local currencies possess, an exchange rate. Exchange rates are what keep global currencies sane, and based in reality. TLDR: The value of a currency depends upon the ability for holders of that currency to redeem it for goods and services. The reason the dollar is strong is because goods and services from the United States can be reliably purchased using the dollar. If the United States magically ran out of goods to sell then the dollars they printed would be worthless. If the entire world used the same currency then it would be all but guaranteed that the currency would be unredeemable in some places, and as a consequence the value of the currency would drop.
axlee 3y ago
DKK is pegged with the euro at 7.46, it's just a currency in name.
- woleium 3y ago
  Someone has to pay to maintain that peg
- madsbuch 3y ago
  It is soft pegged and has leeway. This is, btw, exactly the reason why the interest rates are pushed down as a consequence of Novo having success. If the Danish central bank did not need to maintain this peg, they'd probably just let the value of the DKK increase relative to the USD – instead this manifests as more expensive housing in Denmark as the interest rates are kept artificially low.
  - MichaelZuo 3y ago
    > If the Danish central bank did not need to maintain this peg, they'd probably just let the value of the DKK increase relative to the USD – instead this manifests as more expensive housing in Denmark as the interest rates are kept artificially low. Assuming the majority of purchasers of Danish housing are made by those who are paid in DKK, so this is in fact keeping the prices low.
    - madsbuch 3y ago
      > Assuming the majority of purchasers of Danish housing are made by those who are paid in DKK, so this is in fact keeping the prices low. When the cost of servicing a mortgage goes down, the price will go up. How do you support that prices should go down?
      - MichaelZuo 3y ago
        Because if the value of 1 DKK relative to a euro declines, they will need to spend more on imported goods, travel, etc., and therefore less income for a potential mortgage.
Retric 3y ago
We don’t have a global economy. Compare the ratio of foreign vs domestic trade globally and countries largely cycle money internally. It does vary with very small countries having more foreign trade, but they also don’t necessarily have an independent currency.
- friend_and_foe 3y ago
  Yes, most commerce in any particular national currency is domestic. But the amount of capital reserve a treasury or central bank needs in foreign currencies scales with the percentage of their commerce that is import and export. If less than 1% of trade is with external economies, that's not too big of a deal. If 10% is, that's a huge amount of capital that has to be taken out of productive use and put towards purchasing foreign currency to stick in a vault. It doesn't have to he the majority, it just has to be a not insignificant amount to see the problem. And then any significant changes create crises like this, where a government has to scramble to purchase foreign currencies or change interest rates to adjust their currency supply, these all have impacts on the domestic economy such as inflation, deflation, unemployment etc.
  - Retric 3y ago
    Those currency reserves are offset by other countries buying up your currency to use as reserves. So quite a bit ends up canceling out with central banks creating currency from thin air to exchange for currency foreign central banks created from thin air.

madsbuch 3y ago

Why not? We have this notion that currency is managed in a super-political way. However, there is everything political with currencies and currency management. It is literally the difference on depression and labor shortage. For me, it is weird that this responsibility is deferred from political processes and the democracy. If a sovereign country wants to own its own politics, it also need to own its own currency.

brnt 3y ago
Yes, but at the same time nobody exists in a vacuum, especially not small countries like Denmark in highly globalised economies. Collaboration on something like the Euro makes small countries more powerful and effective, and thus more sovereign, compared to adhering to some technical definition of sovereign and being all the more easy to ignore or manipulate by global and/or much larger economies. For the small ones, cooperation bring power, it does not take it away.
- madsbuch 3y ago
  > Collaboration on something like the Euro makes small countries more powerful and effective, and thus more sovereign ... Effective, yes – just like a single party system is more effective than having multiple parties and democratic processes. more sovereign – how? I really can't see how Spain is more sovereign managing their unemployment issues when they can not control supply of their own currency, and thus investment?
  - brnt 3y ago
    No, nothing like a single party system. Or are you saying a nation only fighting for itself is like a single party system? Control = power x influence. The argument was that more control can be had through having a local currency. I think, for smaller countries, more control and thus more sovereignty is had through teaming up, because the cooperation is (at least in the case of the EU) democratic, and is a tool more powerful than any national tool ever could be, and therefore control is larger.
friend_and_foe 3y ago
Ideally, currency should just exist and people should pick it based on how well it suits their needs. National currencies are fine in an environment where most economies are mostly domestic, because the effect of import and export on currency availability and foreign currency exchange is miniscule. This was the environment when these national currency schemes were devised. In a globalized economy, every country has trade imbalances which means they all need to have foreign currency reserves, adjust their reserves when economics change on the ground and adjust interest rates, this is a massive overhead for every country in the world that doesn't need to exist.

dumpsterdiver 3y ago

> National currencies just don't make sense in a globalized economy. If that were true, then you would happily trade your American dollars for rubles. Because it just doesn't make sense that they should be valued differently, right?

LadyCailin 3y ago
That’s certainly not something I would want to do now, but let’s assume there already was only one currency. Would Russia or whatever one country, be able to single-handedly tank the worth of the global currency? I am not an economist, so this is a genuine question.
- dumpsterdiver 3y ago
  I'm not an economist either, but my armchair take is that the value of a particular currency depends very much upon the perception that the entity who prints the currency will maintain the status quo (i.e. they won't unexpectedly go bankrupt tomorrow). I believe what would happen with a single world currency is that it would generally be very unstable due to things like war, economic policy that proves disastrous for one or more of the members of that currency club, and as a result it would become untrusted. For instance, recall the US housing crisis of 2008-2009. This caused massive economic damage, and resulted in the United States printing money at unprecedented levels. Imagine now that the world utilized a single currency and one single nation faces a similar crisis. Would the world be expected to accept that the entire currency should be devalued due to excessive money printing simply because a small member country couldn't keep their shit in order? To frame this idea in a simpler fashion, imagine a single person named Scott who creates their own currency. That person hands out the currency when purchasing goods and services, and later on people can come back and spend that currency in order to purchase Scott's belongings. This works pretty well because Scott never hands out currency that he isn't able to back up with his belongings. Now imagine that there is a group of ten people who print their own currency, and you can use that currency to purchase the belongings of any of those ten people, regardless of who gave you that currency. Let's imagine that Scott is by far the richest person in that group, and Carlos is the poorest. When Scott hands out massive amounts of money for legitimate goods and services, that money can now be spent amongst any of the ten members. Let's imagine that someone decides to spend that money to purchase the belongings of Carlos. It turns out that Carlos does not have enough belongings to sell compared to the amount of money possessed by this spender. Nonetheless, all of Carlos's goods are purchased in one fell swoop (before inflation even has a chance to show itself), and Carlos now has zero belongings. Now imagine that instead of being a person, Carlos is a country. No one living in that country would be able to purchase goods anymore, because they were bought out. This would result in ridiculous inflation (meaning that the purchaser of those goods received a massive discount compared to the real value of the goods purchased in that place), and the country's economy would essentially be broken with no fix on the horizon as long as they continued to use that same currency. I think it's important to remember that currency isn't just printed paper, but a promise that you can redeem that paper for goods and services. When an entity is no longer able to provide goods or services then the currency that entity uses loses value because it cannot be trusted to be redeemable in some places. If that currency happens to be the common currency used by the rest of the world... well, sucks to be the rest of the world I guess. Keep in mind that when a country which uses their own local currency experiences economic problems, they can still purchase more reliable currency using their unreliable currency, and then purchase goods from that place reliably (even though that other country won't be able to do the same). Because the other country cannot reliably purchase goods from the economically compromised country, they will impose a very high exchange rate based on the risk that the exchanged currency will not be redeemable. This is the essential quality that local currencies possess, an exchange rate. Exchange rates are what keep global currencies sane, and based in reality. TLDR: The value of a currency depends upon the ability for holders of that currency to redeem it for goods and services. The reason the dollar is strong is because goods and services from the United States can be reliably purchased using the dollar. If the United States magically ran out of goods to sell then the dollars they printed would be worthless. If the entire world used the same currency then it would be all but guaranteed that the currency would be unredeemable in some places, and as a consequence the value of the currency would drop.

axlee 3y ago

DKK is pegged with the euro at 7.46, it's just a currency in name.

woleium 3y ago
Someone has to pay to maintain that peg
madsbuch 3y ago
It is soft pegged and has leeway. This is, btw, exactly the reason why the interest rates are pushed down as a consequence of Novo having success. If the Danish central bank did not need to maintain this peg, they'd probably just let the value of the DKK increase relative to the USD – instead this manifests as more expensive housing in Denmark as the interest rates are kept artificially low.
- MichaelZuo 3y ago
  > If the Danish central bank did not need to maintain this peg, they'd probably just let the value of the DKK increase relative to the USD – instead this manifests as more expensive housing in Denmark as the interest rates are kept artificially low. Assuming the majority of purchasers of Danish housing are made by those who are paid in DKK, so this is in fact keeping the prices low.
  - madsbuch 3y ago
    > Assuming the majority of purchasers of Danish housing are made by those who are paid in DKK, so this is in fact keeping the prices low. When the cost of servicing a mortgage goes down, the price will go up. How do you support that prices should go down?
    - MichaelZuo 3y ago
      Because if the value of 1 DKK relative to a euro declines, they will need to spend more on imported goods, travel, etc., and therefore less income for a potential mortgage.

Retric 3y ago

We don’t have a global economy. Compare the ratio of foreign vs domestic trade globally and countries largely cycle money internally. It does vary with very small countries having more foreign trade, but they also don’t necessarily have an independent currency.

friend_and_foe 3y ago
Yes, most commerce in any particular national currency is domestic. But the amount of capital reserve a treasury or central bank needs in foreign currencies scales with the percentage of their commerce that is import and export. If less than 1% of trade is with external economies, that's not too big of a deal. If 10% is, that's a huge amount of capital that has to be taken out of productive use and put towards purchasing foreign currency to stick in a vault. It doesn't have to he the majority, it just has to be a not insignificant amount to see the problem. And then any significant changes create crises like this, where a government has to scramble to purchase foreign currencies or change interest rates to adjust their currency supply, these all have impacts on the domestic economy such as inflation, deflation, unemployment etc.
- Retric 3y ago
  Those currency reserves are offset by other countries buying up your currency to use as reserves. So quite a bit ends up canceling out with central banks creating currency from thin air to exchange for currency foreign central banks created from thin air.