by Siew Cheng Hoe

Created on: March 27, 2009   Last Updated: March 29, 2009

From the consumer point of view, a single global currency is a blessing. No longer do we have to face the nightmare of foreign currency exchange and bear the transaction cost.

No longer do we have to mentally convert the cost price of a bag selling in China into our currency when we make a buying decision.

A single global currency eliminates the cost of transaction and in term benefits us, the consumers.

Given all the benefits of single global currency to the citizens of the world, why are the governments of the world not moving towards the goal of having a single global currency?

The problem is more of a political nature. A single currency means the loss of control by the governments of the world.

The governments of the world hold a tight control over the values of the currency. Through the use of monetary policy, they allow the value of their currencies to appreciate or depreciate.

Currency defines the country. It has a nationalistic flavor in it. Americans are proud that the whole world is recognizing the greenback. They are proud to know that many people in the world accept the value of the Dollar.

Take out a few currency notes from your wallet and look at them now. What do you see?

You will see the name of your country printed on the notes. You will see the national icons or the former presidents printed on them. You will see the national icon in the notes that you are now holding.

Try asking the citizens of America and China to give up using their currencies and use a common currency that reflects characteristics of neither country. You are more likely to create a national outcry and be stoned to death.

The citizens of many countries in the world similarly express their patriotic feelings to their respective countries by respecting the legal tender of the country.

Many people will point out to the success of Euro as an example that a single global currency could work.

However, many people fail to recognize that countries in Europe share many common cultures. Even then, not all the countries in Europe are agreeable to the concept of a single currency for Europe. The adoption of the Euro as the common currency for European countries was a complex task that took years to complete.

Imagine asking super world powers like China, America, India and the Middle East countries to give up their currencies and use a single currency. How likely is that going to happen?

The plan is not likely to work in the next hundred years. All these countries are proud of their cultures and financial achievements. They are not likely to give up the usage of their own currencies.

A single global currency is a nice concept in theory and it would be nice to see it in practice. However, it is not likely to work due to the differences in monetary policies of different governments and strong patriotic feelings of the citizens.

Learn more about this author, Siew Cheng Hoe.
Click here to send this author comments or questions.