Quora: “What are the benefits and drawbacks of a global currency?”

My answer:

A common currency even just for a continent like Europe has a lot of downsides and few benefits. In theory, a common currency will increase trade between countries as it’s easier for individuals to do so without having to worry about exchange rates and changing money every time one travels abroad. Still, with a common currency, vastly different economies which need different monetary policies are unable to do so. Italy’s in an economic crisis and needs to increase its interest rate to encourage savings and short-term investments over long-term investments? Too bad, Germany’s doing just fine, so we don’t want things going down there. French Presidents like Georges Pompidou and Francois Mitterand were quite favorable towards a common currency as post-WW2 France had seen many devaluations in the franc, making the currency weak, and they wanted a common one to get as strong a currency as the German D-mark. However, with such a common currency, your country cannot devaluate it even if the economic situation calls for it, as different such economies are in different situations and demand different monetary policies. The European project has failed (see: EuroTragedy by Ashoka Mody), and taking it to a global level would be even more disastrous. Imagine the differences between the economies of the United States and Venezuela (or most African countries). It would be horrendous to force them to pursue the same monetary policies.

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