In my class last night we started talking about currency speculation and capital controls and a student asked why all countries couldn't just use the same currency. I was obviously out of my element because I couldn't come up with a satisfactory answer. I could speculate on the political reasons on the domestic side--desire for sovereignty, inability to raise money for deficit spending, it being harder to index the currency value in a particular country to other fundamentals--but all of this seems like a lot of fairly imaginary stuff (like the general equivalent itself) so could likely be changed with some will and foresight. In short, I really didn't know what to say except that it would be hard to do.
I'm sure there are arguments about this and reasons given for and against this kind of proposal. I also assume there are far more practical and pragmatic difficulties based on a lot of other aspects of the global political economy that are connected to the current system of national currencies. On the other hand, the price of oil (like the price of gold before) seems to be fairly important as an index of the value of all other currencies and commodities and that is theoretically priced according to a market even if the supply is basically regulated by the cartel (though I can also see many problems with this analogy.)
Anyway, I was hoping someone on the list could shed some light on this question: why can we not have a world currency? Either through references to other conversations or your own formal or informal understanding.
[WS:] I think you already mentioned the main reasons - local control of the supply of money is not a trivial thing. The ability to print money and control its supply is one of the most important prerogative of national governments, the other two being its monopoly for institutional violence and its sovereignty vis a vis other national governments.
The reason that you did not mention is cognitive-psychological. Currency is a common yard stick used in everyday life. People are used to it and do not want to trade it for anything else. Just like Brits or Americans do not want to abandoning their cumbersome inches, pints, Fahrenheit degrees and what not for the far superior metric system - most people would be reluctant to abandon their national currencies for a standard one.
For example, when Poland changed its currency in the early 1990s after the period of hyper-inflation, people continued to use the cumbersome old system in which everyday prices were expressed in millions. This continued for several years, despite the fact that the new currency system, much easier to use was officially in place. Many people even took the effort of "translating" the new prices into the more cumbersome "old" ones.
The same can be said about the measurement system in the US. For any outsiders it is extremely cumbersome, especially when one wants to make any operations using that system (division, multiplication, etc.) One can easily multiply, say, 3.5 cm by 4.75cm using a handheld calculator, but multiplying, say, 3 3/8 in by 4 3/16 in is not that easy - it requires converting fractions to decimal fractions if one wants to use a hand held calculator. Yet, the US-ers are very attached to this cumbersome system, and the attempts to convert to metric in the 1970s failed.
I imagine any attempt to introduce common currency would meet similar popular resistance. I think popular opposition to such currency - for reasons similar to that against metric system in the US - is probably the main reasons against such currency. Financial institutions, otoh, would probably favor such a system, as they are already using something similar to it (e.g. US dollar, or purchasing power parity dollars).
Wojtek