Pros & Cons of Adopting an International Currency

Development of an international currency has been discussed for years, as it could potentially rectify a lot of problems that result from inflation, deflation and fluctuation in value between countries. Arguments against an international currency, however, are many and usually center around political differences.

Reduce Effect of Inflation

Economists claim that an international currency would not be affected by inflation and deflation, both of which have had disastrous political and economic impact on countries.

Eliminate Transaction Costs

International currency would eliminate the transaction costs of converting money from one currency to another. This would benefit travelers as well as people who conduct business between countries.

Boost in International Investment

International business transactions could be much easier and more efficient with an international currency, as the value differences between different countries wouldn't make business transactions more beneficial for certain countries.

Political Obstacles

In order to adopt and manage an international currency, the countries of the world would have to agree about interest rates, loans, credit and other money management issues. This would be incredibly hard to do as it would require overcoming political and ideological conflict. Even if the majority of countries could agree, this could potentially eliminate what little power smaller countries have, resulting in a tyranny of the majority countries essentially controlling less powerful countries.

Loss of Individual Country Control Over Money

Many countries use interest rate alteration to boost the economy when that particular country is struggling economically. Many Islamic countries don't condone the use of interest to control the economy, and some countries don't believe in interest at all.