20230405: NEverything
Disclaimer: I am not an economist, nor do I understand currency macroeconomics. I am sharing this thought anyway. So, if you feel it is stupid, maybe it is!
I have been seeing news from many places for a while. Many of the financially oriented channels usually have a ticker running at the bottom which shows market performance of that region, some stock prices of that region and currencies of that region.
There is only 1 number for the currencies, ex INR = 8x.xx, AUD = 1.xx, EUR = 1.xx, GBP = 0.xx, so on. One currency nobody publishes is USD.
Very simply because it is always 1. Everything else has a rate published only against the US dollar, even though I can realistic convert anything to anything .
It is a very accepted thing that USD is the default base currency - because it is in demand the world over.
There probably are several reasons why it happened so, it is what it is .
The majority of the world want to move away from this (according to various news).
Russia is leveraging the sanctions and trying to establish the Rouble.
India wants to have more flexibility and is establishing INR with regional trading partners.
China is trying to establish Yuan economy to counter everyone trying to curtail it.
They are talking about creating a BRICS+ economy.
I am sure OPEC+ would love something on similar lines.
Etc.
World famous historian - Yuval Noah Harrari , suggests that money (and by extension - currency) is the biggest story we humans have created and universally accepted.
If you think about it, it is a fiction. Of course we all need it, want it and use it for almost everything nowadays. But it is a story and a fictitious thing. Especially after the gold standard was removed. It truly is fiction.
In the olden days (when money and currency was needed and created), trade with places across seas, long distances, was hard. It made a lot of sense to have a currency for the region. A local currency made sense.
In recent times, after the entire world has been cut into universally accepted country borders (almost universally i.e.), it became the country's currency.
In recent decades, the borders are becoming more rigid but the economy, trade and supply chains are getting highly integrated. It makes a lot of sense to have 1 currency.
However, it is not practically possible to ask everyone to give up their national currency. It is like expecting everyone to give up their national flag, or national anthem or national anything. It is simply very emotional and very high on nationalistic feelings.
However, currency is a story, a fiction.
A new common story which doesn't hurt such sentiments will likely feel more acceptable.
Basically create another thing - everything from nothing and call it the universal base currency. I would call it NEverything - it is truly everything from nothing.
Of course, we have to figure out who will be the custodians of it to issue and manage etc., but those are the kind of things we anyway love to do as peoples. Shouldn't be very hard as long as it creates more high paying jobs.
Every other country's currency will be benchmarked against NEverything (NEV). There will be a INR/NEV, AUD/NEV, GBP/NEV, EUR/NEV
and also a USD/NEV = xx.xx
I am not an economist either, nor have any proficiency in anything finance related. So I've always found the tenuous-at-best relationship between currency and reality hilarious. I have never seen my salary, actually. It'd be a small pile, but at least once I'd like to take a swan dive like Scrooge into it :).
ReplyDeleteAnd then there's bonds (promise that we'll pay you back Nx what you gave us), stock (promise that you own an obscure fraction of a company), puts/gets (promise that you'll buy a stock - itself a figment of our collective imagination - at some later date/time), those pesky default swaps (debts that were bundled and sold to whoever thought they could strongarm the debtor), and so on. it's turtles all the way down! it works because we have written laws to make it so (which are also just things we happen to agree to do). Let's not even get started on land ownership.
As always, the great prophet Douglas Adams summarized it thus when he said we were descended from the Golgafrinchans: "The Golgafrinchans were not an alltogether unproductive people, however. They set right to work holding Committee Meetings (wherein nothing was accomplished) but holding them none the less. The standard 'leaf' was adopted as Legal Tender, but when bath-loving Golgafrinchan captain realized what an overabundance of leaves there were, orders were made immediately to have most of the forests burned down. Guards set to work on this at once, glad to finally have some importance in their lives other than declaring war on uninhabited pieces of land and interrogating various gazelle. "
If NEverything can escape the "its not fiat currency" mantra from the crypto dudes maybe it will stand a chance!
But really, the USD will be viable as a currency converter only until the US itself is viable as a hegemony, much like the pound sterling before it. I remember reading an article about what people fleeing bad countries carry with them. It's always something that has inherent value: gold, for example. When things get real, none of this will matter, only what you can actually hold. Until then, we can build whatever castles in the air!
KD, the entire Financial industry is a bunch of stories, one castle built on top of the other...
Deleteas far as things of value are concerned, even gold has no real value. Its everybody's idea agreement that it is of value. Just like we have agreed that diamonds are precious.
When things get real (very real), only thing that'll matter is if you can eat it or drink it!
I would go for another fiction :)!
ReplyDelete