One of the main issues most people have with the current fiat currency system is how every individual currency has a different value. Most of these currencies are all dependent on how the US Dollar performs, as this is the world’s global currency for the time being. However, if the current trends keep up, the US Dollar will be worth as much as the Euro. What effect will this have on Bitcoin, though?
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Fiat Currencies With Same Value Are Confusing
Depending on who you might pose the question to, fiat currencies with the same value are quite confusing. The main reason there are different fiat currencies is because individual countries want to have some form of control over the amount of money in circulation. For instance, you can’t pay with US Dollar in Europe, although you can in Hong Kong.
Assuming the US Dollar would become worth as much as the Euro in the near future, the question becomes why one would be better than the other. There are quite a few EU residents who would like nothing more than to get rid of the Euro, and use a global currency instead.
Furthermore, Mario Draghi – President of the European Central Bank – issued a statement indicating he will create more money for the economy in Europe. Do keep in mind that by saying he will “create more money”, he means there will be more bills and coins in circulation, why do not increase the overall value of the Euro. In fact, such a move would have the opposite effect as it would decrease the value of the current monetary supply.
Europe’s economy is in a lull right now, as the economy is subject to a nearly nonexistent inflation. There are a few options to counter this problem, such as deepening the negative interest rates even further, or extending the money-printing program. However, the Federal Reserve is expected to increase interest rates in the US, creating an interesting paradigm where both currencies are moving in opposite directions.
Parity between two major fiat currencies is not something that happens all that often. However, it wouldn’t be the first time the US Dollar and Euro reach a state of parity, as the same thing happened 13 years ago. But one thing’s for sure: global currencies are the future, and neither USD or EUR falls into that category.
Bitcoin Is A Universal and Borderless Currency
Unlike these fiat currencies, Bitcoin is the only form of value that offers a universal appeal. One Bitcoin is the same in Kenya as it is in Texas or Singapore. The value of that Bitcoin is slightly different everywhere, yet it can be exchanged into nearly every local currency is existence today.
However, there is one major drawback to Bitcoin as well, as it operates completely outside of the control of central authorities or banks. Additionally, Bitcoin is not accepted as globally as fiat currency, and it will take some time until this happens. That being said, central banks can only do so much until the ship sinks completely.
Source: CNN Money
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