A World with two currencies

Consider a world with only two currencies. This can be for example: Euro's and dollars, Bitcoins and Euros, Bitcoins and Dollars, but also two different crypto currencies.
To study a simpler case select: A World with only one currency . It is advised to study this document first.
The emphasis in this document is about the impact of the bitcoin.


The most important difference between a situation of "One currency only" versus a "Two currency situation" is that there are not two isolated areas (which each their own currency), but that there is trade between the two areas.
Let us consider the situation: Euro's and bitcoins.
Let us also make certain assumptions: The total number of bitcoins and Euro's is the same, the exchange rates are the same, all the prices for all products and services are the same.

Suppose in each area there is a company who wants to build a large project for which lots of money is required: company A trades in Euro's and company B in bitcoins.
Each company does not have enough money in his account.
The solution for company A is to go his bank and lend money in Euro's. Company B will do the same and lend money in bitcoins.



Created: 15 Januari 2018

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