Currency areas are a result of currency blocks reformation. They appeared after World War II for more effective and better-coordinated currency policies between the participant countries.
The major currency areas are the USD zone and the Euro zone, there’s also the Yuan area becoming more and more powerful.
We continue our articles about the peculiarities and drawbacks of the current money system; today, we are going to tell you how this currency rule started, how it affects the free economy, and how the RESERVEUM group can change the world’s currency disbalance.
US Dollar Area
is a good example of the USA pressuring less developed countries that depend on their cooperation with the hegemon. This union was never legally registered and is fully based on the traditional US policies of messing with other countries’ economies when they are in trouble.
The list of participants of the USD zone is constantly changing, today it includes the USA and their overseas territories; Bermuda; Bonaire, Sint Eustatius and Sabu; British Virgin Islands; the British territories in the Indian ocean; East Timor; Marshall Islands; Palau; Panama; El Salvador; Turks and Caicos; Federated States of Micronesia; Ecuador; Zimbabwe.
Most of these countries use USD as their national currency, even though only the FED can issue dollars.
We can also mention here such a phenomenon as dollarisation. It happens when the people of a country choose the dollar over their national currency. It happens in times of hyperinflation when the USD looks like a safer option.
You can find out more about the reasons and consequences of money value loss in our article called “Hyperinflation: 5 Examples from the History”.
This is how the Dollar Area works: the USA gets rid of extra currency that FED has issued to stimulate the economy and also receives commodities almost for free; the dependent countries also import inflationary dollars and suffer from their national currency devaluation and poverty.
The currency area within the European Union is considered to be a counterweight to the USD zone, while Euro is the second most important currency in the world. The Euro area was created when the USD influence was growing rapidly; the main goal was to develop an economic space that could rival with USD.
The Euro area includes 19 countries: Austria, Belgium, Germany, Greece, Ireland, Spain, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Finland, France, and Estonia. The main currency issuer and the regulatory body for all of them is the European Central Bank.
Inside the Euro area, all the operations are processed in Euro; there’s free trade which gives it advantages against the USD zone. However, all the countries in the Eurozone are in different stages of their economic development, so a higher Euro rate strikes hard on weaker states, while a lower Euro rate damage the leading players. Due to this imbalance, all the participant countries suffer from inflation, labour migration, lack of qualified people, etc.
Despite countless failures to start a currency union, the Asian region is preparing an economic experiment – a Yuan zone. They have been talking about it since 2020, and the Chinese authorities may soon get down to action.
Right now, the borders of the future Yuan zone are within the Comprehensive regional economic partnership which unites 15 countries: China, Japan, South Korea, Australia, New Zealand, Brunei, Vietnam, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand, and the Philippines.
As with Euro, the Yuan zone is supposed to become a counterweight measure to the USD in international transactions. The early sign of this global process is the digital Yuan that has been present in the domestic market in China; it may as well act in the international arena as an effective and convenient settlement method.
However, the digital Yuan, despite all of its positive sides, may turn away the region’s countries from joining the Yuan area. The most interesting part about this centralised digital currency is that the government manages every operation, which may not sit well with the foreign partners of China.
You may find more information on the drawbacks of centralised cryptocurrencies in our article called “the Digital Dollar”.
As you can see, in such a project, the economic profit is a veil for politics. As in any currency union, the dominant participant will use their power against other partners.
On the other hand, it is vital to form countries’ unions with free trade zones and the common settlements system. Further economic globalisation, and, therefore, development, is impossible without such conditions.
Here in RESERVEUM, we believe that we should take an inevitable though tough step – to turn our backs on centralised money systems. Until we pass this threshold, any currency zone would be based on dominance and submission, which means it would help some partners make a profit on the other ones.
Only switching to a global decentralised currency would help tackle such economic problems as inflation import, political pressure, uneven capital distribution, speculation, etc. A decentralised cryptocurrency is basically just a smart contract. This algorithm can automatically follow and analyse trends and volumes of all the economic sectors synchronising the money flow accordingly. Any financial settlements, from international transactions to retail purchases are processed in a smart contract instantly, with minimum expenses and absolutely transparently.
The governments do not adopt this money model because they are used to using a centralised financial system that can have political influence and be a source of a seigniorage income. But the main elements of any economy are business and consumers, and decentralised money is equally profitable for both of them.
According to the analysis group findings: reserveum.org