The president-elect wrote that the coalition of non-Western countries “should expect to say goodbye to selling into the wonderful U.S. Economy” if it backs a currency other than the U.S. dollar.
It would have to be issued by some world central bank.
Money doesn’t need to be backed by anything, necessarily. Or, I guess you could say money is “backed” by all the goods and services available to purchase.
Not trying to be a prick; here for discussion. Wherrrree do we actually put central bank? I guess that maybe matters less than staffing the thing?? Obviously not an easy thing to do overnight but man we’d need to have like, serious cooperation and transparency to do that proper. Maybe not impossible though!
We’d want it to be in a neutral place, if at all possible. Perhaps a country would be willing to donate a small portion of their territory so an independent jurisdiction could be formed, not unlike Washington D.C.
For anything more than basic bartering, i.e. credit, it needs to be backed by an assurance that the fiat currency will be managed properly. Your basic loan is predicated on the trust that when you borrow $1000, the US won’t go and print another $1000 for shits and giggles and halve the value of what you get repaid. (I’m ignoring interest for simplicity here.)
For example, let’s say a car costs $30,000. I borrow that on a three year loan. But after one year, a maniac takes charge of the federal reserve and starts printing money. Now, since the value of the dollar has dropped, the same car costs $90k, but I’m still buying it at the original price. (Remember, the bank owns the car until I pay off the loan.)
For a real-world example, look at any hyperinflation scenario. When the unit value of a currency drops that fast, nobody wants to trade in that currency, because they would lose buying power.
This is why a currency has to be backed by a trustworthy body. Cryptocurrency is great, but if the operators have no consequences for manipulating it, then it’ll never replace traditional government-backed currency.
…it needs to be backed by an assurance that the fiat currency will be managed properly.
That’s the point of having a global central bank. They would manage it, and we would want to ensure that all appropriate mechanisms for oversight and accountability were in place. Transparency would also be of high importance.
Edit: I should point out that this is already somewhat in place. The US dollar, a fiat currency, is currently the world reserve currency, and it’s managed by the US federal reserve central bank. The problem is, the US federal reserve is the US central bank and it is not neutral, nor is it accountable to the rest of the world.
It would have to be issued by some world central bank.
Money doesn’t need to be backed by anything, necessarily. Or, I guess you could say money is “backed” by all the goods and services available to purchase.
Not trying to be a prick; here for discussion. Wherrrree do we actually put central bank? I guess that maybe matters less than staffing the thing?? Obviously not an easy thing to do overnight but man we’d need to have like, serious cooperation and transparency to do that proper. Maybe not impossible though!
We’d want it to be in a neutral place, if at all possible. Perhaps a country would be willing to donate a small portion of their territory so an independent jurisdiction could be formed, not unlike Washington D.C.
For anything more than basic bartering, i.e. credit, it needs to be backed by an assurance that the fiat currency will be managed properly. Your basic loan is predicated on the trust that when you borrow $1000, the US won’t go and print another $1000 for shits and giggles and halve the value of what you get repaid. (I’m ignoring interest for simplicity here.)
For example, let’s say a car costs $30,000. I borrow that on a three year loan. But after one year, a maniac takes charge of the federal reserve and starts printing money. Now, since the value of the dollar has dropped, the same car costs $90k, but I’m still buying it at the original price. (Remember, the bank owns the car until I pay off the loan.)
For a real-world example, look at any hyperinflation scenario. When the unit value of a currency drops that fast, nobody wants to trade in that currency, because they would lose buying power.
This is why a currency has to be backed by a trustworthy body. Cryptocurrency is great, but if the operators have no consequences for manipulating it, then it’ll never replace traditional government-backed currency.
That’s the point of having a global central bank. They would manage it, and we would want to ensure that all appropriate mechanisms for oversight and accountability were in place. Transparency would also be of high importance.
Edit: I should point out that this is already somewhat in place. The US dollar, a fiat currency, is currently the world reserve currency, and it’s managed by the US federal reserve central bank. The problem is, the US federal reserve is the US central bank and it is not neutral, nor is it accountable to the rest of the world.