There is always a tension between having a common means of exchange, a useful and good thing, and having to have the same interest rate, the same external currency conversion rate, not necessarily a good thing.
Despite the efforts of the U.S. Treasury Department and other government agencies to curtail financial flows (both overt and covert) to bad actors, these regimes continue to benefit from the lawful inflows of hard currency and external financing.
Capital flight and surging imports have evidently contributed to the sharp drop in the external value of the local currency.
The external value of the local currency, the cedi, has dropped precipitously from 1.4 cedis to the dollar in January 2.2 cedis to the dollar in July -- a drop of 57% in terms of the local currency.
One problem with a single currency is that an external shock can hit some countries or regions harder than others.
Mr Koehler said that the IMF had experience in post-conflict situations, and could help stabilise Iraq's currency, manage its external debt, and help manage its tax system.
Alternatively, IMF special drawing rights could be used for the purposes of external commitments, until a new global reserve currency has been negotiated.
In our own analysis of our problem, we feel the currency crisis is both the product of internal and external factors.
But the real heart of the optimal currency idea is will the economies react asymmetrically to an external economic shock?
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Any country that abolishes its own currency needs to have an economy that is strong and flexible enough to accommodate external shocks, since it cannot ride them out by printing money.
The main drawback of a currency union is the loss of an independent monetary policy to cushion the economy against external shocks.
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