AnuragSahu-13411-PGPM_The case is similar like EURO in Europe. The crisis which Greece and Spain are facing today is mainly because of their inability to print their own currency. It may lead to high inflation sometimes but still the country is able to balance its payments in a much more efficient way. If such thing will happen globally, the results would be much more disastrous. Currently, US dollar is the major currency for trade among nations. And it is functioning fine with some minor problems in some countries. But those problems are due to their internal issues, which can be corrected. But in case of common currency, countries ability to control its own issues and balance of payments would deteriorate. Thus global currency is not a solution to transactional problems.
PratikKumarGhosh-13356-PGPM. A global currency may not solve the transaction problem. If countries have to have a common monetary policy in terms of the currency they are using, they must also have a common fiscal policy which is unlikely till the time we have a common world government. Otherwise, the problem of fiscal profligacy like the one in PIIGS nation may arise, where the common currency may be the means of fiscal abuse. Later on, the problem could become political and spear its ugly head in form of a global currency crisis and eventual bank runs. Therefore, it is unlikely that a common world currency could solve transaction problems without creating any further problem.
A global currency by UN or IMF like SDR (Special drawing rights) will definitely solve the problems of exchange in International Arena. Now, we can’t relate the above topic to that of the Euro Zone, because it is confined to only a few of the European countries not the whole world. Here the individual currency of all the countries will remain same only the International Currency will shift from the Dollar to a new global international currency (say SDR). This means that the hoarding of dollar will be very less and the whole world will start accumulating the new international currency as their Forex reserve .This will help the developed and developing economies to continue their trade in terms of New International Currency and manipulate or Peg their currency to make their exports cheaper and boost their trade, as and when required simultaneously it will also reduce the currency volatility as the world will not be dependent any more on one country and their currency. For ex:- the contagion effect would not have taken place the way it did in U.S in 2008 if the dollar would not have been an International Currency. Also the context of a common monetary union but not a common fiscal union is fine with the Euro zone countries but not when we talk about the whole globe having a common global currency. Euro Zone: - This didn’t happen in case of Euro zone, as countries like PIGS are substantially weaker than other Euro zone countries and that hampered their exports and overall competitiveness with respect to other European economies. So,they couldn't make their goods competitive with respect to German goods. For, their currency was stronger and they couldn't make it weaker. Moreover, the dollar being an international currency is a short run solution of the International currency. The great Belgium economist “Robert Triffin” said in his “Triffin Dilemma” that if a country’s currency is the international currency then that country is bound to collapse as it will keep printing its money to meet the world’s demand which will substantially widen its “Current Account Deficit”. This was evident in 1971, which led to “Nixon Shock”. And the same thing is going to happen in next 50 years, if the international currency won’t be shifted from dollar to a common International Currency. China has been vouching with other major countries to change the International Currency from Dollar to SDR, to weather any storm like "2008 subprime crisis" and to reduce the currency volatility.
Global Currency by UN will help in avoiding arbitrage opportunities and create a level playing field for business adopting a global delivery model which will in turn increase the profitability. This will in turn weather the impact of global pressures on business. The idea of world being a global village will be supported in this aspect. The single UN currency will enable better governance and better monitoring and prevent closed economy which affect the liquidation flow like Chinese economy. This will aid better scenario for Trade liberalization. This will enable the speedy implementation of WTO Doha round recommendations. This will reduce trade deficits and help countries balance their BOP so as to improve the stature of emerging economies in world especially in the current economic situation. S.Santhosh Kumar FT13472
AnuragSahu-13411-PGPM_The case is similar like EURO in Europe. The crisis which Greece and Spain are facing today is mainly because of their inability to print their own currency. It may lead to high inflation sometimes but still the country is able to balance its payments in a much more efficient way. If such thing will happen globally, the results would be much more disastrous. Currently, US dollar is the major currency for trade among nations. And it is functioning fine with some minor problems in some countries. But those problems are due to their internal issues, which can be corrected. But in case of common currency, countries ability to control its own issues and balance of payments would deteriorate. Thus global currency is not a solution to transactional problems.
ReplyDeletePratikKumarGhosh-13356-PGPM. A global currency may not solve the transaction problem. If countries have to have a common monetary policy in terms of the currency they are using, they must also have a common fiscal policy which is unlikely till the time we have a common world government. Otherwise, the problem of fiscal profligacy like the one in PIIGS nation may arise, where the common currency may be the means of fiscal abuse. Later on, the problem could become political and spear its ugly head in form of a global currency crisis and eventual bank runs.
ReplyDeleteTherefore, it is unlikely that a common world currency could solve transaction problems without creating any further problem.
A global currency by UN or IMF like SDR (Special drawing rights) will definitely solve the problems of exchange in International Arena. Now, we can’t relate the above topic to that of the Euro Zone, because it is confined to only a few of the European countries not the whole world. Here the individual currency of all the countries will remain same only the International Currency will shift from the Dollar to a new global international currency (say SDR). This means that the hoarding of dollar will be very less and the whole world will start accumulating the new international currency as their Forex reserve .This will help the developed and developing economies to continue their trade in terms of New International Currency and manipulate or Peg their currency to make their exports cheaper and boost their trade, as and when required simultaneously it will also reduce the currency volatility as the world will not be dependent any more on one country and their currency. For ex:- the contagion effect would not have taken place the way it did in U.S in 2008 if the dollar would not have been an International Currency. Also the context of a common monetary union but not a common fiscal union is fine with the Euro zone countries but not when we talk about the whole globe having a common global currency.
ReplyDeleteEuro Zone: - This didn’t happen in case of Euro zone, as countries like PIGS are substantially weaker than other Euro zone countries and that hampered their exports and overall competitiveness with respect to other European economies. So,they couldn't make their goods competitive with respect to German goods. For, their currency was stronger and they couldn't make it weaker.
Moreover, the dollar being an international currency is a short run solution of the International currency. The great Belgium economist “Robert Triffin” said in his “Triffin Dilemma” that if a country’s currency is the international currency then that country is bound to collapse as it will keep printing its money to meet the world’s demand which will substantially widen its “Current Account Deficit”. This was evident in 1971, which led to “Nixon Shock”. And the same thing is going to happen in next 50 years, if the international currency won’t be shifted from dollar to a common International Currency. China has been vouching with other major countries to change the International Currency from Dollar to SDR, to weather any storm like "2008 subprime crisis" and to reduce the currency volatility.
Avinash Kumar Jha
DeletePGDM-DM14111
Global Currency by UN will help in avoiding arbitrage opportunities and create a level playing field for business adopting a global delivery model which will in turn increase the profitability. This will in turn weather the impact of global pressures on business. The idea of world being a global village will be supported in this aspect. The single UN currency will enable better governance and better monitoring and prevent closed economy which affect the liquidation flow like Chinese economy. This will aid better scenario for Trade liberalization. This will enable the speedy implementation of WTO Doha round recommendations. This will reduce trade deficits and help countries balance their BOP so as to improve the stature of emerging economies in world especially in the current economic situation.
ReplyDeleteS.Santhosh Kumar
FT13472