Money rules the world. It’s everywhere. From our pockets to the deepest pits of the Internet. But not all money is equal. Currencies fluctuate and change their prices on a daily basis in a way that nothing seems stable.
In this article, we will answer the question: ‘what is the most stable currency in the world today’. We will talk about the Swiss franc, Norwegian Krone, US Dollar and Singapore Dollar – four currencies that have shown to be particularly safe.
First of all, let’s talk about what does ‘stable currency’ actually mean.
- It’s a good vehicle for storing wealth in the long term. That means its value doesn’t fluctuate rapidly and both growth as well as decrease in the price are rather smooth and relatively insignificant. You can’t expect to suddenly wake up a millionaire by investing in a safe currency, but similarly, you won’t go bankrupt. But, if you buy a huge amount of this money, you’re more than likely to get a similar amount back, years later.
- It’s safe to take out loans in such currency. Since the danger of a sudden drop or increase in price is not serious with stable currencies, they’re a good vehicle to take out loans in. You won’t have to worry about having to pay back more than your interest rate, because the currency’s value simply won’t change that fast.
- Stable money circulates in stable countries. Safe currencies are not a coincidence. They’re actually an effect of a secure political situation, strong economy as well as wise handling of the money by the government. Irresponsible spending, debt, unstable government – these, and much more, are what truly causes currencies to fluctuate.
Now, let’s find out what are the most stable currencies in the world today!
Cheese with holes, triangle-shaped chocolate, watches worth more than your car…
Switzerland is a truly exceptional country. But there’s more to it than the couple of things it’s associated with most often.
Let’s talk about Swiss money! Since 1515, the year, it ceased to expand, Switzerland has always remained neutral. That means, it was not a part of any political, military and economic union or alliance. It didn’t take part in any military or political conflict. Since the 1990s, it consistently rejects requests to join the European Union. It’s as sovereign as it gets. The only organizations it is a part of are the United Nations and the Schengen Area. Historically, it acted as an intermediary during disputes, but was never a part of any. All of that has a major impact on the country’s currency – the Swiss franc.
Being the ‘outsider’ in an interconnected world means that Switzerland is almost entirely immune to the ups and downs of the international financial market. Swiss franc won’t get dragged down along any other currency – since 2015, it is no longer pegged to euro.
Wait, what is ‘pegging’? Let us explain! Pegging means establishing a fixed exchange rate between two states. Two participating countries or entities agree to set a specific price for each other’s currencies.
The removal of the peg is closely connected to the 2011 eurozone crisis. Remember when Greece made headlines all over the world, for being in a massive debt? It was later relieved by a massive euro transfer, that has been warranted with multiple conditions the country had to fulfill in order to remain stable and rebuild its economy.
Let’s get back to Switzerland, though! Although it’s quite far away from Greece, and certainly has a different culture, it has been hit with the consequences of the crisis quite severely. Seeing the blurry future of the euro, investors flocked to the Swiss franc, causing its value to soar. What might sound like good news, has actually been quite disastrous for Switzerland, causing its exports to be less competitive. The country’s well-developed tourist industry has suffered as holidaymakers complained about increasing prices of their weekends in the Alps.
Events abroad that wreak havoc domestically – that’s like a script for a Swiss horror movie. The eurozone crisis has most likely been the straw that broke the camel’s back and inspired the Swiss to take even more direct control of their money. Removing the peg was, therefore a measure aimed at gaining even more financial independence and control over the currency. As a writer for The Economist argued, ‘it should be criticized for adopting it in the first place’. Getting rid of it was a sudden and very unexpected move on a quite stable and predictable international financial arena. The country’s economy indeed took a hit as franc’s value soared again, the currency, however recovered and is now stable and unshaken.
Would we say it’s a safe and secure way to store your wealth? Definitely!
Continuing the trend of rich, European countries, let’s talk about Norway. In order for us to understand why the Norwegian Krone is a safe currency, we have to start with outlining the unique conditions of the state it operates in.
Norway has got no debt. It can be largely attributed to its ability to avoid the infamous ‘oil curse’ – a condition often suffered by rich countries with large natural oil reserves. These countries, upon experiencing a sudden and drastic spike in their money reserves, go on a public spending frenzy, which inflates the economy and encourages going into debt. Norway’s PM in years 2005-2013 has highlighted country’s unique approach to their gas revenue. Namely, it’s being put in a sovereign fund and is not spent immediately. Thanks to that, taxes for individual citizens can be low and private spending can grow, accelerating the economy and strengthening the currency.
The second reason why Krone is a stable currency is the fact that Norway does not belong to the European Union. While there are many benefits of the membership, it does come prepackaged with a degree of dependency and reliance on other countries’ successful performance. Contrary to Switzerland, however, it’s not widely considered to be the safe haven for when everything goes south. Investors didn’t inflate the Krone’s value, like they did with the franc in the aftermath of the eurozone crisis in the early 2010s. Although the year 2011 was a rather poor one, when it comes to Krone’s value, the currency was able to swiftly bounce back and grow from that point onwards.
Last, but not least, Norwegian Krone is not pegged to any currency. Its value changes along with the fluctuations of the market. And while that might be bad news in some cases, don’t be scared about sudden drops in value! Here’s why – the economy of Norway is designed with sustainability in mind. The government owns about 7000 enterprises and companies, its people spend more and more every year, and the economy is stable.
The US Dollar has a peculiar and one-of-a-kind place in the global financial system. It is the default currency of the world, a point of reference for everyone. Stock markets use it. Currencies are pegged to it. Wealth is stored in dollars. Many countries, such as Australia, Canada, Singapore, and many more base their currencies on it. But how did it happen? Why it is that the dollar took place as the unofficial currency of the world? And how does it impact its stability?
The 19th century belonged to Great Britain. It was the time of immense colonial conquest of the British – almost a quarter of world’s territory was under their rule at the height of their empire. Following the end of the First World War, the exhausted European countries had to make space for an emerging global hegemon – the United States, which, by that time, have had already had a strong presence on the Western Hemisphere. With President Woodrow Wilson’s strong willingness to engage in European matters, Americans were everywhere. Trade relations started, but they were no longer conducted using British Pounds. The USA were a new player on the international arena, but they settled the rules. The 20th, as well as the 21st century were (and are!) the times of the dollar.
How does that affect the stability of the US Dollar? For starters, it is the most popular currency in the world. Everyone uses it, from East to West, North to South, from major corporations, to criminals. It keeps the United States in the trade game, propelling its economy and further strengthening the dollar.
Now, let’s follow up on the last point. The state of American economy is another factor strengthening the stability of dollar, apart from its power as the leading global currency. It is the world’s largest economy by GDP, with its 2019 production expected to reach an unimaginably high $21.35 trillion – $22.2 trillion in 2020. Despite the fact that the US national debt is roughly similar to the country’s GDP, it is the ever-growing production that fuels the dollar and keeps it stable.
To sum up, unless there’s a huge global power shift, the US Dollar is definitely a safe currency!
Looking at the US dollar, we can see how important strong economy is, when it comes to maintaining a stable currency in a debt-ridden country. But the United States are a global hegemon. What about a small state, such as Singapore?
In one aspect, the situation in Singapore is similar to one in the USA – its GDP goes head to head with the national debt. However, only about 2% of citizens of this tiny country are unemployed, which means that its money has a serious economic backing. It is actually reflected by changes in the exchange rate of the Singapore Dollar over the years. Or, we should rather say, a lack of such! For the last 10 years, it only went as low as 1,20 for $1 and as high as 1,44 for $1, which indicated quite significant stability of the currency. Singapore is a part of the so-called ‘Asian Tigers’ – a conglomerate of Hong Kong, South Korea, Taiwan and Singapore – four rapidly developing Asian economies with bright futures. The stability and good prospects definitely make up for a huge safety of the Singapore Dollar!