User talk:Talalfouani

Universal worldwide currency
Why isn't there a universal worldwide currency? A currency is an artificial commodity that is used as a medium of exchange and a way to lend, borrow, and store value. Because history has shown that private sources of currency (e.g., privately issued banknotes) are unstable and subject to fraud, all real currencies in use today are forms of government debt. (Virtual currencies, like bitcoin, are artificial commodities, but it remains to be seen whether they can qualify as real currencies in other respects.)

A US dollar bill has value mostly because everyone agrees that it has value. In a sense, it's an illusion, but because everybody believes in the illusion it becomes real. However, there is an actual practical basis for the value people put on it: the US government guarantees that it will accept dollars as payment for all debts and taxes owed to the government. Even if you don't owe any money to the government at a particular moment, someone else does and almost everyone in the US will, so there will always be a demand for dollars.

For there to be a universal currency, there would have to be a world government with the power to tax, borrow, and manage the money supply AND the power to forbid all others from issuing competing currencies. That's a very long ways off and, for a variety of reasons, it might not be a good idea even if a world government emerged with that kind of power.

Why would governments oppose a universal currency? The issuer of a currency earns a small profit, called seigniorage, which reduces the need for tax revenue. The ability to control the amount of money in circulation, in the form of physical currency, notes, bonds, and bank deposits, is an important tool of economic management, helping governments prevent depressions and accelerate recovery from recessions. If a country takes on unmanageable amounts of debt, the ability to increase the amount of money in circulation also allows a country to gradually default on parts of its debt through inflation. Changing the exchange rates between currencies provides a way to adjust relative prices and wages between countries without making wholesale changes inside each country. The second and fourth reasons are the most important ones. Giving up those advantages is hard, and can be disastrous. Greece has suffered a severe depression in recent years in large part because it no longer has a separate currency and therefore cannot change its exchange rate with the rest of the world and cannot inflate away its excessive debts.

Regional differences within the currency zone There's another issue as well that is implied by the importance of adjusting exchange rates. Any economic region that uses a single currency must be willing to subsidize the least productive areas within that zone. In the US, for example, the rich states have been subsidizing the poor states for a very long time, and only occasionally does anyone bother to point it out. Most Americans are not even aware of it, much less resentful about it.

Compare that with the situation in Europe. Really solving the economic crisis in the Euro zone would require an agreement by the northern European nations to subsidize the southern tier for a very long time to come. This idea causes so much bitterness in countries like Germany and Sweden that it cannot even be productively discussed. As a result, nothing gets done, and the whole Euro zone is sliding slowly into a prolonged recession or depression.

The need for sovereignty A free-trade zone with a common currency does have enormous benefits in terms of the efficiency of trade and finance, but no such zone can work if the individual countries within it refuse to surrender a great deal of their fiscal sovereignty and adhere to strict financial discipline.

For that to work in the long run, there must be a higher level of government that has sovereignty over the entire zone, including the power to tax and spend as well as the power to issue currency.

This is why, from the very beginning, many people were highly skeptical of the ability of the Euro to survive without a sovereign European government. The current EU lacks sovereignty, it is not much of a "union," and it does not cover the same territory as the Euro currency zone.

Many countries in the EU don't use the Euro, and some countries that use the Euro aren't in the EU. Plus, there are all sorts of agreements, each with different memberships, that govern trade, customs, travel, political rights, court jurisdictions, and so on, and almost none of those things coincide with the EU itself:

You can think of the current problems in the Euro zone as a microcosm of the economic chaos and paralysis that would occur if the leading nations got together and decided to create a world currency. Except that the differences among the ~20 nations using the Euro are trivial compared to the deep, deep differences among the ~200 nations around the globe. Talalfouani (talk) 15:01, 27 December 2016 (UTC)

US Markets
Dow nears 20,000, Nasdaq hits record as tech stocks gain A trader works on the trading floor at the opening of the day's trading at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 22, 2016. REUTERS/Andrew Kelly A trader works on the trading floor at the opening of the day's trading at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., December 22, 2016. REUTERS/ANDREW KELLY X By Yashaswini Swamynathan Wall Street opened slightly higher on Tuesday, with the Dow Jones Industrial Average resuming its march toward 20,000 and the Nasdaq hitting a record, helped by gains in technology shares.

Energy stocks also rose, supported by oil prices. U.S. crude was up 0.94 percent at $53.52, while Brent crude inched toward $56 as a deal to limit supply comes into effect on Sunday. [O/R]

The Dow Jones industrial average .DJI marked its seventh straight week of gains on Friday, feeding on optimism that President-elect Donald Trump's plans for deregulation and infrastructure spending would bolster the economy.

"The first day of trading in the final week of 2016 is not likely to reverse form last week's trading sessions," Peter Cardillo, chief market economist at First Standard Financial wrote in a note.

Global markets made small gains on data that showed Chinese industry racked up its strongest profit growth in three months in November, suggesting the world's second-largest economy was improving.

Ten of the 11 major S&P 500 sectors were higher, with technology .SPLRCT and energy stocks giving the broader index its biggest boost. Talalfouani (talk) 15:08, 27 December 2016 (UTC)