Which countries would gain or lose the most from bitcoin as a world currency?

[sethsethseth]

The idea of a world currency is occasionally raised by various countries, but I have yet to see an analysis on what the effects of this would be.  I wasted all my Quora credits asking economics majors the question, and I got an interesting answer.  What do you guys think?

http://www.quora.com/Which-countries-would-gain-or-lose-the-most-from-a-world-currency

I would agree with Ravin Thambapillai's analysis that competitive open economies like Scandinavian countries, Hong Kong, and Germany would be the biggest winners.  I would add that rouge states like Iran, Venezuela, Cuba would benefit from the damage the US would take with the loss of its reserve currency status, as well as the removal of banking restrictions.  Argentina and Russia might be up there too.

[Benson Samuel]

Was a well thought out answer. Wonder if he knows about Bitcoin.

[Stephen Gornick]

The idea of a world currency

"World currency" is a pretty vague term.

Would this be a currency that is a commodity?  (e..g, gold?)   Or a digital one controlled by an entity?   Or a decentralized one like Bitcoin?

Would the use of this single world currency be enforced (i.e., barter is outlawed, use of alternatives made illegal, no private currencies, etc.)?

[nevafuse]

It probably depends on who's perspective you are looking at.  I honestly believe bitcoin will reduce the purpose of countries down to geographical only.  So those who have the most to gain are those who don't rely on the government.  The biggest losers will be the ones employed by the government - military, police, politicians, etc.  But those losses will be temporary & they should easily be able to find jobs in the real world assuming they are willing to adapt.  With so much money left over without having to worry about taxes will start a economic boom this world could never imagine.

[sethsethseth]

"World currency" is a pretty vague term.

I purposely made the question vague so that I would get reasonable answers from economists instead of a discussion about bitcoin.  But the question does state that countries would lose their monetary sovereignty.  So however you think that might apply to bitcoin....

[Realpra]

It probably depends on who's perspective you are looking at.  I honestly believe bitcoin will reduce the purpose of countries down to geographical only.  So those who have the most to gain are those who don't rely on the government.  The biggest losers will be the ones employed by the government - military, police, politicians, etc.  But those losses will be temporary & they should easily be able to find jobs in the real world assuming they are willing to adapt.  With so much money left over without having to worry about taxes will start a economic boom this world could never imagine.

You expect too much even from a big improvement in economic efficiency. Sure central banking, large scale bailouts and purposeless wars will no longer exist for prolonged periods, but to imagine you won't need to pay for soldiers/police/firemen/politicians is crazy.

Someone has to put out fires and keep you safe - whether it be a "tax" or "security firm fee". Taxes can also still be levied at gun-point on property values, you can't hide your house on the blockchain

BTC IS cool and WILL change the world, but is not magic.

[FreeMoney]

BTC is cool, will change the world and is magic.

[Rudd-O]

All countries -- collective fictions of authoritarian control -- will lose out to Bitcoin.  Some more, some less.  But all will.

That is a good thing.

[sethsethseth]

According to Ravin Thambapillai's analysis, exporters are the biggest winners, so I looked up some World Bank export data.
From http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS

Biggest exporting country zones (% GDP)
41% Europe and central asia
45% Middle east and north africa
42% Small States (population <1.5m)  http://data.worldbank.org/region/SST

Lowest exporting countries (% GDP)
13% USA
12% Brazil
15% Japan
14% West bank and gaza
11% Rwanda
9% Nepal
12% Pakistan
13% Haiti
12% Ethiopia

Countries with exports over 100% of GDP:
209% Singapore
165% Luxembourg
112% Macao
223% HK
101% Ireland

Countries with exports between 75% and 100% of GDP:
Belgium
Brunei Darussalam
Congo
Czech Republic
Estonia
Guyana
Hungary
Malaysia
Malta
Netherlands
Palau
Puerto Rico
Seychelles
Slovak Republic
Thailand
UAE
Vietnam

Considering only large economies, Germany, China, and Canada are the top exporters at over 30% of GDP, while the US, Japan, and Brazil are on the bottom.  Germany and China have their currencies tied to their biggest trading partners within free trade zones, but Canada floats its currency, even though 84% of its exports go to the US.  So it generally appears that where international trade is high, the disadvantages of giving up monetary sovereignty can be outweighed by the advantage of eliminating exchange rate risk, at least within a free trade zone.

Ravin Thambapillai's answer states that the loss of control of monetary policy affects all countries more or less equally.  However any country that pegs its currency to another one has already given up monetary sovereignty, so the main downside of a world currency does not exist for these countries.  This list includes China, Venezuela, Saudi Arabia, Ecuador, Panama, many Caribbean islands, and many central and west African countries.  Smaller countries in the euro zone have also given up monetary sovereignty to a large extent.

[ArticMine]

I would not dismiss the United States as a winner so quickly. Countries that are major exporters of digital goods and services are likely to be the biggest winners and in this area the United States is a major player. There is a reason why Wordpress based in the United States embraced Bitcoin.

[n8rwJeTt8TrrLKPa55eU]

All countries -- collective fictions of authoritarian control -- will lose out to Bitcoin.  Some more, some less.  But all will.

That is a good thing.

Exactly.

"Which countries individuals would gain or lose the most from bitcoin as a world currency?"

Answer: all, except politicians and other parasites which rely on financial repression to sustain themselves.

[FrogBBQ]

A world currency will not happen any time soon since it would deny any country the ability to wage war against another.

If you would have a world currency, nobody would be able to manipulate the currency in order to build an army, which comes at great cost. Look at what happened in Germany over the last century or more recently in the US who has de facto been in default since August 1971 when the conversion to gold was "indefinitely suspended". This has been true for all great powers, back to the Roman empire really. All these wars cost a lot of money and being able to print is the only way to finance them, for a time at least.

A world currency would mean relative peace and this unfortunately, as good as it sounds, is not what many leaders and vested interests would like to happen any time soon. One can make lots of money by wedging wars...

[nevafuse]

You expect too much even from a big improvement in economic efficiency. Sure central banking, large scale bailouts and purposeless wars will no longer exist for prolonged periods, but to imagine you won't need to pay for soldiers/police/firemen/politicians is crazy.

Someone has to put out fires and keep you safe - whether it be a "tax" or "security firm fee". Taxes can also still be levied at gun-point on property values, you can't hide your house on the blockchain

BTC IS cool and WILL change the world, but is not magic.

I never said I wouldn't be paying for those services.  I'll just get them in a different way than via the government.

I don't believe it is far-fetched to believe that a society that uses a cash-like currency will have some serious problems when trying to collect taxes.  There are millions of people in this country that don't pay taxes now because they deal in cash (think service industry - servers, bartenders, babysitters, etc).  Not paying taxes seems like a high risk when your bank account can easily be linked to you.  Just imagine when everyone is dealing with a cash-like currency without using banks.  Now that risk doesn't seem nearly as high.  Even large businesses where the IRS probably gets a majority of its money from, will have to start competing with smaller businesses that don't report anything to the IRS so you get a 15-35% bump in pay.  This rapid decline in income may spur the government to start printing even more money to supplement the declining tax revenue.  Now the dollar will be worthless & the government won't have any money to pay the IRS/police to catch tax evaders.  Probably won't happen tomorrow, but I can definitely see the play by play in the near future.

[mcgravier]

This rapid decline in income may spur the government to start printing even more money to supplement the declining tax revenue.  Now the dollar will be worthless & the government won't have any money to pay the IRS/police to catch tax evaders.  Probably won't happen tomorrow, but I can definitely see the play by play in the near future.

As long as people will be able to buy goods directly with bitcoin, goverment can print as much as it wants. It wont make any difference. Rather opposite - killing their fiat currency would force even more people into bitcoin. This is simply punishment for dishonest policy. Goverments of this world forced harmful fiat curriences thus pushing evolution forward. And ultimately that evolution created a fearless monster, that will make us free.