BARD PAPER: OPAL0002
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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