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RC Monetary Policy

by John Macpherson


The long answer is that, aside from the political challenge, it's not clear that it's in the RCs best interest to have a unified currency. Currency unification is a good thing when you want to encourage lots of cross-border trade and investment and when the economies involved can be expected to go through roughly the same ups and downs. The reason currency unification is good is not so much that people don't have to change money at the border but because investors and companies don't face "currency risk" from movements in currency prices. The ability of economies to adjust factor prices relative to the rest of the world/RC is made much easier by simply having the assets of different worlds denominated in different currencies. That way, if Baldur takes a down-turn, the currency price will quickly and naturally adjust the prices of all Balduri assets by the simple expedient of having Balduri Bucks decline in value relative to other RC currencies. The decline will continue until Balduri assets and exports become sufficiently cheap that people begin buying more of them and the currency price re-equilibrates. If all worlds had the same currency Baldur would have to change the nominal prices on all its assets, which, for a variety of reasons, is more time consuming and costly.

So why doesn't every state in the union have a different currency, you ask? Because the benefits to currency unification I mentioned above are very real and valuable. Furthermore, the US is economically homogenous enough that it tends to go through ups and downs at the same times. The RC is made up of worlds with wildly different populations and TLs, which, furthermore, have only been trading on a limited scale for a decade or so. Expecting their economies to be so linked that they rise and fall together is not reasonable.

Ergo, they won't have a unified currency.

Based on what we know about how the real world works, it would be far more likely that Aubaini currency is the common coin of interstellar trade. Not only do they have the largest economy, but, because of their high TL, there will be a high demand for their goods and therefore for their currency. These factors would make Aubaini currency overwhelmingly the strongest in the RC.


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