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This question got me thinking, about the nature of currency and space.

When Qui-Gon tries to buy ship parts from Watto he gets this response.

Qui-Gon Jinn: I have twenty thousand Republic dataries.

Watto: Republic credits? Republic credits are no good out here.

Why are credits no good? Even if they are not a local currency it is likely they could be exchanged. Tatooine is not a lawful planet so even if it was outlawed somebody would buy them at an exorbitant exchange rate.

In the real world, many countries do not have the US dollar as a currency but you can still use it to buy things. Or exchange it for local currency.

The Republic still exists and Republic worlds accept credits, so even outside of the Republic credits should still have value.

It was the largest most stable (up to that point) political entity. So in theory Credits should have more value than the Hutt controlled Wupiupi (I can't imagine the Hutts are too worried about inflation and would mint coins when it suited them)

Yes, space is big, but in the Star Wars universe, it is also easy to traverse, so you can get a bunch of credits and go to a republic planet to use them.

There is, of course, the obvious out of universe explanation that if credits were valid, Qui-Gon Jinn would not have picked up Anakin and the galaxy would be saved.

But in universe is there a reason that credits could not be used on Tatooine?

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    The question is how totalitarian the Hutts are about ruling their worlds. It might be difficult (or too much of a hassle for Watto) to exchange credits if they have been banned by the Hutts. It might be a risk/reward problem in that case and he might not be willing to sell it for "just" 20000 credits instead of a lot more. – Adwaenyth Jul 7 '17 at 10:11
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    Or there could be local infrastructure needed for credit trades or some way they could not be transported/transferred outside of the republic? I never underestimate the ability of people to add reasons for such things in the EU. – Jeremy French Jul 7 '17 at 10:13
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    Goes hand in hand with the question of why Watto was the only one in the entire city who could sell them the hyperdrive they needed, despite Tatooine presumably being close enough to Naboo that they could make the trip with a damaged one.. – Annatar Jul 7 '17 at 10:40
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    Probably because many inhabitants of Tattoine were wanted by the Republic, and could not use Republic credits as they could get caught. Also we do not know if Republic credits are cash, or other instruments of payment that could be traced (in some Legends books, Galactic Credit transfer looks like electronic payment in our world). – TimSparrow Jul 7 '17 at 11:19
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    @JeremyFrench I'm quite confident Palpatine was clever enough to figure out a way to ensure it still ended well for him. The entire course of the war probably would have gone differently (Maybe he would have engineered for the CIS to win; who knows?), but that doesn't mean Palpatine's plans fell apart completely without Anakin. Keep in mind that the Clone Army was commissioned before Anakin arrived on the scene (during Valorum's term), which suggests that Palpatine already had plans to kill off the Jedi before then, too. – jpmc26 Jul 7 '17 at 23:49
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There are many reasons for not accepting foreign currency which apply in this situation as they apply in the real world case.

First, normally local traders only accept local currencies. In the UK, save very specific places, you can only pay with pounds. Sure you can exchange somewhere else, but the trader himself will not take it.

There are practical reasons in the real world: it is difficult to be up to date with the current exchange rate and real value of the currency, identifying the authenticity of the currency itself is difficult and you can find out you've been ripped off. After all is way easier for me to pass on a fake euro as real if your actual currency is not euros. If you accept foreign currency you're also increasing your cost and your risk. You get some money that you won't be able to use straight away; you need to exchange it to local currency (at your cost and expense), that takes time and on the meantime some catastrophe can happen devaluing the currency itself.

For any local trader accepting only local currency is always best save touristic places (not the case).

Then there're also in universe practical reasons. If you live on a place controlled by the Hutts you don't want to be drawing attention to yourself and specially you don't want to attract the wrong kind of attention.

Trying to exchange a lot of Republic Credits out of the sudden is bound to raise a couple of eyebrows; where is that money coming from? Is he smuggling behind my back? Is he having dealings with the Republic to interfere with the Hutts, maybe to bring us down? Better to simply silence him all together…

So generally speaking Watto had a lot of good reasons not to accept foreign money and, specially, republic credits. It is probable that people who do end up ripped off, dead, or both.

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    While I'm not sure it applies to Star Wars, another problem would be change. Unless all foreign currency transactions are exact, you're unlikely to be able to offer change in that currency. – David Starkey Jul 7 '17 at 14:36
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    I keep thinking of someone coming to the US and trying to buy a car with North Korean Won... – CGCampbell Jul 7 '17 at 14:43
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    Assuming credits being some kind of "digital" currency, it could also be that they lack the technical facilities to process the transaction. – PlasmaHH Jul 7 '17 at 14:51
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    @CGCampbell Going to North Korea and trying to buy a car with USD is probably the more apt comparison, modulo sanctions and such. This article has a bit more to say about that. – chucksmash Jul 7 '17 at 21:06
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    Buying tomatoes from the local street market every Sunday with Bitcoins has proven difficult, so far. – Ghoti and Chips Jul 7 '17 at 21:12
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It's important to note that Tatooine had an extensive black market economy. Republic credits were often electronic (although not exclusively), meaning there was a trail of whomever possessed it (Qui-Gonn offered 20,000 credits to Watto, which was almost certainly electronic). The Hutts issued their own currency, the Wupiupi, which seems to be purely physical (which is better suited to a black market economy).

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    This was in Phantom Menace, long before the Old Republic became the Empire, never mind the New Republic. – Zeiss Ikon Jul 7 '17 at 12:47
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In the question, you draw an analogy between Republic credits and the US dollar. I think the more relevant real-world analogy is the Zimbabwean dollar, i.e., fiat currency with little to no real worth.

As Watto said:

"Republic credits? Republic credits are no good out here. I need something more ... real."

Out of universe, this line wasn't necessary to the plot; given the circumstances of the Queen's escape from Naboo, it wouldn't have been implausible if they simply didn't have enough cash on them. The real purpose, in my opinion, was to provide a foreshadowing of the sorry state the Republic was in. Granted, it was the Republic's political problems that were important to the plot, rather than the poor state of their economy, but the one and the other often go hand-in-hand.

[NB: I'm taking a strictly movie canon perspective here; the broader Disney and/or Legends canon may differ.]

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    The Republic had been around for a very very very long time at this point; certainly much longer than the US and almost as long as civilization on Earth. Why would you expect its currency to be vulnerable to hyperinflation? I would expect its currency to be as stable as it was possible to be. – kingledion Jul 8 '17 at 17:58
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    @kingledion, I don't see how the age of a civilization is relevant to the state of its economy. Greece is considered the cradle of Western civilization, but that didn't stop its economy from melting down earlier this century. – Harry Johnston Jul 9 '17 at 1:33
  • The US dollar is also fiat currency, so I think the comparison holds. – Brian McCutchon Jul 9 '17 at 5:42
  • @Brian, yes, they're both fiat currency in the technical sense, but the US dollar is nonetheless considered robust. That doesn't seem to be true for the Republic credit. I'm aware of no evidence that this is specific to Tatooine, I don't think Republic credits would be accepted on any planet that isn't either part of the Republic or (perhaps) actively trading with it. – Harry Johnston Jul 9 '17 at 6:00
  • @HarryJohnston Greece has not been a single polity for all that time. The Republic, as far as I can tell has had an operating elected Senate for 5000 years or so by the time of the movies. That is longer than Rome's senate operated (~500BC ~0AD) or the US's senate (225 years and counting). – kingledion Jul 9 '17 at 18:54
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Tatooine is in the outer rim of the Star Wars galaxy. As an example, let's say that you live an hour away from the nearest gas station at freeway speed. And suppose that a stranded motorist offered you $20 for your last 1 gallon of gasoline. Ignoring any inclination you might have to be a good samaritan, in a strictly economical sense, and without consideration to any other factors, this would be a good score on your end. But considering the fact that you live out in the middle of nowhere, have to spend 1 hour driving to the gas station, pay extra for the gas that's sold out in the middle of nowhere, and drive an hour to get back home, suddenly that $20 doesn't really seam like a good deal for you anymore. Even more so if it's your last gallon of gasoline and you would have to walk the 60 miles to the gas station. What is more "real" that Watto refers to is likely bartering. Sure, $20,000 republic credits is probably a lot of $ in the Star Wars universe, but cash isn't always the most practical way to trade.

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    Not a great analogy. If you really live that far from a gas station, then you or someone you know probably has their own gas tank in the yard. Filling that up every couple of months with 500 gallons or so (at $3 a gallon) means that you'd be happy to sell a few gallons for $20 a gallon to make a profit. So it would be with exotic spaceship parts on systems far distant from the exotic spaceship parts factories. Its not like Watto needed those parts to get home – kingledion Jul 8 '17 at 18:01
  • How is this not a good analogy? Tatooine, being in the outer rim, is not within the republic's sphere of influence. There's even a direct quote in the movie that explains this to you "The Republic doesn't exist out here". Now do you understand? Sure, Tatooine is a de jure "republic" planet, but everyone knows the de facto rulers of Tatooine are the Hutts, and they have their own currency. It doesn't matter how much republic credit Qui-Gon offers, they're no good to Watto. – apocalysque Sep 7 '18 at 9:20
  • What better deal was Watto going to get for his parts at some broken down outpost in the middle of nowhere? That is why Watto would have taken the credits; he could have found a way to cash them with someone headed to the inner systems. – kingledion Sep 7 '18 at 11:57
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Try going to an undeveloped region outside of the big towns only with your American-Express card. Try to get you car fixed there at a small local workshop. See how they won´t care if it is gold or black or whatever if it is only a small little plastic card. They´ll need something more real. (For example Rodrigues Island - try getting lunch outside the main "City" without hard cash)

Credits no good without connection to international banking system!

  • I would kind of understand this, but Qui-Gon said he had them. I'd assume on a more civilized planet he could just use the Jedi order Corporate Card. – Jeremy French Jul 10 '17 at 9:05
  • I imagine having money does not necessarily mean having physical "coin". A Republic so developed as this would have some technology like bitcoin to not carry around lumps of cash all day. – Daniel Jul 10 '17 at 10:27
  • Also from a story standpoint this clearly send´s the message that you are really far out. Everyone who has traveled has had that experience where you are at least uncertain if your usual means of payment will work and most have some sort of backup like traveler checks etc. - now the trip to Tatooine was entirely unplanned and as such no preparations of that sort where made. – Daniel Jul 10 '17 at 10:32
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Many outer rim systems don't accept republic credits. Probably not many opportunities to exchange for local currency, and I also believe the outer rim systems aren't huge fans of the republic according to lore so a resistance to adopting their currency system could make sense.

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    source please????? – DVK-on-Ahch-To Jul 7 '17 at 16:21
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    Just lore from playing the KOTOR games and others. Outer rim settlers typically are trying to get away from the bureaucracy and regulations of the core worlds. – Schrodinger'sStat Jul 7 '17 at 16:47

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