The Global Common Currency, to avoid another Financial Crisis
By, Uwe Paschen.
The Global recession could have been avoided even with the latest financial scandals and the US mortgage crisis would we have had a common global currency. Some of the hard ship that companies do face and have to struggle with is currency exchange and the way they go up and down causing at time great losses or short lived gains.
In Japan when the yen surged to unprecedented hight against the EURO and the US Dollar as well as other internationally traded currencies it cause the Japanese industry great losses even though it performance was still outstanding and its sales rather good. In some cases the Yen rose up to 40% against other currencies.
This caused Toyota (TM) their first annual operating loss since 1938, similar problem did arise for Honda (HMC), Canon (CAJ), Toshiba (6502.T), Sony (SNE), Samsung Electronics, and LG Electronics. Causing unexpected cash flow short falls. Not because of miss management but rather due to dramatic exchange rate changes causing massive losses in revenue.
The Bank of Japan reports that the Yen reached a trade record in December. Meaning that with each single Yen strengthening of the currency against the US Dollar. A company such as Toyota losses $450 million in operating earnings, since prises and wages as well as previously imported raw material such as steel and oil as the Yen was low, can not be adjusted when the Yen rises or the Dollar falls dramatically such as it did.
This is the same case for other companies such as Honda, whose CEO Takeo Fukui want the Japanese government to intervene and buy foreign currencies in order to lower the Yen. This however the Government does not want since it did so in 2004 and both $390 billion worth of Foreign currencies to lower the Yen with mixed results.
So far Japan’s government did opt to lower interest rates and some other help such as loans with next to no interest and tax breaks rather then playing the foreign exchange market. This may be explained due to the fact that even though Japan has lost some feathers in all this global turmoil the Japanese economy is still in rather good health.
And can hold on and weather the storm with some minor adjustments and by tightening the belt some what. Yet Japan would not even feel the effect of a global crisis had it not been for the currency exchanges going out of control. And this does affect other countries to an even greater degree such as South Korea, Algeria in North Africa, Trinidad and Tobago and other countries whose economy can be literally wiped out by such fluctuations in the currency market.
Why a single Global currency would greatly limit the damages of any such financial crisis, as the present one caused by the US economy and mortgage delinquencies. A common Global currency would be a pilar of Global stability and contribute to help establish fair trade around the World at large. Yet the main opposing force to this idea still today are the US, Ironically also the once that have caused this fiasco we are in now.