I’ve contemplated this myself, about competing currencies, and how that would leave the world if we had cheap and ubiquitous FX with little to no drag. Would it not cause a race to the bottom for inflation targeting, and lead to something similar to everyone using a fixed currency?
Why would I hold Canadian dollar or Pesos if their inflation target is 2% versus say the Swiss 1%? Is there enough new money supply for everyone to even attain the lowest inflation currency, or do they bid down the denomination as that countries FX value rises?
Why would I hold Canadian dollar or Pesos if their inflation target is 2% versus say the Swiss 1%?
No. No it wouldn’t.
Because ultimately you (assuming you’re in the US), have to pay your taxes in USD. People say that fiat currencies aren’t backed by anything, but that isn’t true. They’re backed by the fact that every single US citizen and resident has to gather up thousands of dollars every year and pay them to the government. Even if you could convince your employer to pay you in Euros, the IRS will still demand you pay whatever taxes you would owe if you were paid in an equivalent amount of dollars.
I’ve contemplated this myself, about competing currencies, and how that would leave the world if we had cheap and ubiquitous FX with little to no drag. Would it not cause a race to the bottom for inflation targeting, and lead to something similar to everyone using a fixed currency?
Why would I hold Canadian dollar or Pesos if their inflation target is 2% versus say the Swiss 1%? Is there enough new money supply for everyone to even attain the lowest inflation currency, or do they bid down the denomination as that countries FX value rises?
Because ultimately you (assuming you’re in the US), have to pay your taxes in USD. People say that fiat currencies aren’t backed by anything, but that isn’t true. They’re backed by the fact that every single US citizen and resident has to gather up thousands of dollars every year and pay them to the government. Even if you could convince your employer to pay you in Euros, the IRS will still demand you pay whatever taxes you would owe if you were paid in an equivalent amount of dollars.