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The Global Common Currency, to avoid another Financial Crisis
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by Paschen | January 15, 2009 at 06:31 am
2499 views | 58 Recommendations | 48 comments
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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.
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Most RecentMost Recommended Comments (48)
at 07:26 on January 15th, 2009
A good piece. The suggestion may be a viable solution to economic crisis.
at 11:08 on January 15th, 2009
An excellent presentation.
I think over all a good idea but I am concerned about world wide control of anything.
at 16:50 on January 15th, 2009
Good question, and i think we could look at the EU or the CFAF Union how they did it and organized it. Actually the EURO model is rather good so far and very strict as well.
at 15:07 on January 15th, 2009
This is a very bad idea. There is, or was, a global currency called the US dollar but as it turns out it is backed by nothing and Japan and China are now sitting on bags of air. Luckily, Japan has it's own strong currency that can be used to import the raw materials needed without suffering the possible upcoming crash of the US dollar which brings the prospect of hyperinflation.
Every country needs it's own currency to remain sovereign. Not all countires are in as dire straights as Iceland, I would hate to be in the same boat they are in, the rest of us need to be free of the poor choices Iceland made and we need our own currencies to do it.
at 16:46 on January 15th, 2009
Actually, Japans economy suffered a huge blow and this not for the first time due to the currency exchange and Japanese Businesses would love to avoid loosing money with all the market fluctuations. Even the US could not have done what it did with Iraq and the Mortgage scandal if we had a common currency governed has the EU governess the EURO, Democratically that is and with a strict set of rules.
at 16:32 on January 15th, 2009
The US dollar has never been the Global Currency, It is a trading currency Yes, however it is a national currency governed by the US alone not an International body, nor is t the monetary value of any other country. Sovereign believes are rather over due and nationalistic even worth. The key to peace is the European model of interdependency and help those that are not suffering such as Spain used to, or Portugal... Africa and Asia would greatly benefit from a Global Currency and so would the Western Nations. It would also help establish economic justice as it did in the EURO Zone and the CFAF zone.
at 15:34 on January 15th, 2009
Thanks for your thoughts on this important issue. I do think that having one currency will create great economic differences from country to country. The local currency usually takes in the specific economic situation of the area. The euro has made Eastern Europe so expensive for the local population that doesn't have the income to support this regional currency. Also, I rarely agree with Moonwolf, but I must say aside from the conspiracy theory there is some validity of allowing too few people to much power and influence to manipulate economic conditions. The IMF is bad enough. The euro and the European Union also wields far to much power and has created an exercise in power grabbing and manipulation of policy depending on who is in charge for today.
at 20:16 on January 15th, 2009
Eastern Europe is not part of the EURO zone and yet they would like to since it would help them stabiles their economy and make trade a lot easier for them. The EU is a very democratic Union with its flaws as every thing and yet no one in that Union would ever want to go back to nationalistic and individualistic systems. They do benefit greatly from each other and the foundation of that Union was to create lasting Peace, Justice and stability wish it has achieved and I think that is the main point here. I am for one in favour of Global Justice, Peace and Stability.
at 15:52 on January 15th, 2009
I personally love the ECB educational videos for kids on global economies and base economics.
http://www.youtube.com/watch?v=7sjQ7ly2NDU
This one always makes me giggle. Not that I at all find the current economic situation amusing but the rhetoric the banks feed kids is humourous, in a sad way.
at 16:08 on January 15th, 2009
This is a great Video, thanks Tina.
at 16:04 on January 15th, 2009
Just a downright very bad idea just like all ideas of globalization, one market, one government, one currency all controlled by the big money men exclusive club. Currency are only IOU notes based on false values and no-longer on the value of gold.
It would be better to abolish money, capitalism, free market etc. Your post is naive!
at 20:37 on January 15th, 2009
A very mature and constructive comment in deed. Citj not verified.
Globalization is not the problem, its governance is though. Capitalism needs guide lines and strict rules and controls just as every thing does and the US made a gigantic mistake by taking the controls and restriction away in the 1990s. Responsible and long term planning is needed. Global trade has always existed log before the term was even invented. And it will always exist.
at 17:28 on January 15th, 2009
Ermm.... no one heard of the amero yet? they've been talking about it for a while now, since 1999, its the new north american union currancy, after obama rejigs nafta. Coming shortly after a crash of the dollar.
Isn't it just a bit suspect that all this is happening now? how everything is tanking, the economy is on its knees, but wait we got a new currency for you....that'll fix everything.
Others also "thinking" about consolidating currency markets.
at 17:35 on January 15th, 2009
The discussions of the AMERO did start as the Economy in the US, Mexico and Canada where rather well of, and the EURO was introduced as the 5 funding nations of Europe did rather well. All that joined since benefited from it greatly in Europe. People as well Countries and Businesses. The market went down due to 8 Years of war and a Mortgage scam. Due to very relaxed rules implemented after the fall of the soviet Union in the US, something the EU refused to follow and fortunately so.
at 19:52 on January 15th, 2009
I wonder what we would choose for our currency? That might be a huge fight between some nations!
at 20:11 on January 15th, 2009
Yes, as it was for the EURO and the CFAF, yet the worth part of the fight for the EURO was the location of the head offices of the central bank wish in now in Frankfurt yet it was a real nightmare to get every one to agree on one location. The good thing about the EURO is the way it is governed with very strict guide lines so that thing as they happened in the US with the mortgage crisis could not happen in the EURO zone. What did hurt EUROPE was that some invested into the US system and Banks that now are in trouble.
The EURO did really help Ireland, Spain, Portugal, And Italy. and a global currency would help Africa, Asia, South America and the Middle east in the same manner it would make fair trade a real possibility as it did in the EURO zone.
Thank you.
at 20:02 on January 15th, 2009
Moonwolf is absolutely right, beware of a global currency! Very nice and timely piece Uwe!
at 20:08 on January 15th, 2009
Thank you for the read here Caoimhin1, Yes I do agree that being beware is a must and that the idea is not with out potential problem and abuses as every thing can be. Why the biggest issue would be the governance and rules or constitution for such undertaking, however the benefits to businesses and especially smaller once is great as well as the benefit to countries such as Algeria, Japan, Even Europe and north America is not negligible.
at 21:09 on January 15th, 2009
Well, anyway, I am glad I have Yen in my pocket and not an international currency. Every time I buy gas, I'm glad we use the Yen here. Japanese exporters are having trouble because demand for their products have dropped. Japanese importers, on the other hand are doing very well. It is good that Japan is moving from consistent trade surpluses to more balanced trade. The effects of currency fluctuations have been overblown. The cost of importing material for Japan to build exports drops as the yen rises, so Toyota can export their cars at lower prices and still make a buck if there is any demand. If exports drop, good because Japanese workers have been exporting their labour overseas in exchange for bags of "useless" US dollars for far too long.
An international currency would mean that this year when the US will have a $2 trillion dollar deficit we would all pay the price. Governments have different electorates and different fiscal situations that require "local" control on things like interest rates and money expansion. The largest economies would dominate the international currency and export their monetary policies to everyone else.
The British Virgin Islands, East Timor, Ecuador, El Salvador, Marshall Islands, Micronesia, Panama, Palau, all use the US dollar as their official currency and it is the de facto currency in many other places. And it is not as important for trade as it is as a reserve currency.
And besides there is an international currency that has been around for centuries and is recognized the world over; gold.
We may be at the end of the rope for fiat currencies so I cannot see why there is a need to introduce another fiat currency.
I don't want to sound anti-American but if a new international currency is introduced it will be manipulated by the US to meet it's own ends. I don't think the world can trust the US to stick to any sort of international agreement when it starts to go against them and they are punished in the market for their bailouts.
at 21:57 on January 15th, 2009
Good point pokoroto, I am not saying we do it blindly, yet it may be a fair solution and yes some gain and some lose, fair is what I am after and this for all around the globe. No I would not want the US to control any Global currency, and then use it against the world, why the US is against the idea, because they would not be allowed to control it and they know that. Good points you broth up here, thank you.
at 21:57 on January 15th, 2009
The Euro was good and bad, - no shortage of eu workers for you country, but is ecb/centralised control of all member rates and price setting for trade, etc, really a good thing? more and more centralised control (loss of democracy on local policy)?
Looked to me the introduction of the euro was very gradual, and with solid democratic process where each country could "choose" to opt for the new euro and slowly phase out their native currency in a less painful way.
Who knows what will happen over here. They've already minted the coins in denver apparently, but they will have to remove the current nafta agreement for a new superhighway to come into effect. Will you'll be worried about a choice when the dollar is worthless, there are no jobs, no food in the shops and riots on the streets.
Africa union is next with gold mandela's or the afro around 2010 . Then asia, followed by your global currency along with some sort of "nice" new global government?
at 22:11 on January 15th, 2009
Some centralization is always needed why the head quarters of the UN are in New York and some of its other sub division all over the World. UNESCO head office is in Geneva and so on... Same would have to be done for a monetary Union.
Even a global currency would have to be introduced gradually and with great care and caution, so shall we wait another century before we get started and then say why did we not get at least the ball rolling 100 years ago.
Nafta can evolve so can any thing, nothing is written in stone. Why we have can evolve.
Even a global Federation, so what? What is wrong with that? The US started out with a revolution and from some 13 states grow to now 50 and soon there will be no more US, Canada or Mexico, in 30 years time they all have merged into one, because it is more viable and logical.
We could go back to the stone ages and re divide every thing back into clans and tribes and fight each other with sticks and stones until we realize that we be much better off united. Why we have countries and why the EU came into existence and the Asian treaty and so on.
The next step in Global and unite as one and should we fail, then we would all lose as Humanity an may even stop existing du to our failure to unit into one Global Federation.
It is the only way to tackle our Problems may that be fair trade, Justice, Equalities, peace, or even and especially the environment.
Humanity can only survive as one united force. And that can only happen through a global Federation as the ultimate goal. Lets start with the Currency, shall we?
at 22:39 on January 15th, 2009
Of course! that would be an ultimate utopia.
But in reality this is the biggest kettle of fish, and its far from that simple. Do you think one group of people can sucessfully control the masses peacefully and manage our roles/belief's, etc equally?
Am guessing the biggest concern will be if it could evolve into an Orwellian type state where people lose human freedoms and fundamental needs.
at 00:43 on January 16th, 2009
You are suggesting a dictatorship by saying one group of people, where as I am suggesting a Federation based on democratic principals and justice.
With your rezoning the EU would never have been born, nor the US or China even less Russia. Fortunately some did think it was possible and it is. The trick is actually simple, it is equality and justice as well as freedom.
The EU is a model to follow and expend on. If we did not believe in those things and did not made them happen we would still be in the stone ages or have slavery and a feudal system in place.
Either we build a better and united World for tomorrow or we go backward and then you will have an Orwellian state for certain as you do already in North America to some extend by falling back into the trap of fear and paranoia.
at 10:34 on January 16th, 2009
I hope your right, it does sound like a good idea on paper, and most places will go along with it if it means a possibility of better standard of living. As long as its not the same people pulling the strings as we have today.
I guess we will have to wait and see...next few years are going to be interesting alright. Thanks for the thought provolking article btw.
at 23:56 on January 15th, 2009
Money or Your Life: http://www.monetaryreform.org/money/pg3.htm....
Actually we already have a Global Currency. It is called debt. Everyone understands that in a nutshell. We also realize that the Global Currency in use today is also called Global Exchange Rates. One Nations currency is worth more or less than another. Whether they base it on US rates or a basket average of all currency values....it is clear money speculations are held in check to nominal values at those rates.
One must also consider what gives value to any currency? Some will base it upon the Military Establishments ability to defend or aggressively go after its perceived interests. I would like to suggest that another factor plays a roll and that is resources. How much oil does the country have, how much coal, and how much brain powered technology supports such a nation. There we have brute force against resources and procurement that establish Global Authority.
No wonder the US is in the Middle East to control the resources, because they do have a Brutus to push their way around in the world.. The Arabs are still scrambling for their own Atomic Brutus, and then its hands off our Oil US. Yet we have the Russian Bear with untold amounts of Oil resources, and China who plays the Peacekeeper Harmonious Society, despite their claim to being Communisitic and anti-Religious in nature.
Getting agreement to have a Global Currency is in my opinion futile and senseless, that is where do we go when the Global Currency if realized collapses?
I highly doubt there will be such maneuvering because the US can't seem to get its own house in order in concern to who has the right to regulate the money...in concern to The Federal Reserve Fraud.
http://my.nowpublic.com/world/obama-will-become-liar-his-inauguration...
http://www.monetaryreform.org/2005/using_debt_as_global_currency.htm...
Another name for money: http://www.monetaryreform.org/money/pg8.htm...
Monetary Reform: http://www.monetaryreform.org/money/index.htm...
Rev. Jermano
at 07:11 on January 16th, 2009
Great story. It is amazes to me that all things I learned in Sunday School is coming true. One world government, single currency mark of the beast. Wow.
at 09:31 on January 18th, 2009
Doctrines and Religions can blind people and may even be the root to extremism. Since those teachings have caused so much grief and so many wars, I do wonder who the beast really is and what we should really be aware of.
at 03:26 on January 18th, 2009
The good thing about Japan is they made the mistake last time of not being ruthless enough with failing banks, and letting them go to the wall. It cost dearly with a painfully slow recovery. So Im hoping thast Japan will set some good examples, by telling over-extended banks: sorry - none for you! I hear Taiwan (a country I do NOT support!) is giving out shop vouchers fior $100 to each family. That strikesa me like a good idea. Tax breaks are of doubtful value since too many families lack the confidence to spend! And saving at present is not the way to create demand! I'm doing what I can to help: I'm still hoping someone will dish up $40,000 for me to spend wisely - sports cars, a few handguns maybe, some fine wines and a yaught (cant spellit): the thing with sails that goes with wind power on the water. You know what I mean: to store in the MED somewhere.
Sensible Gerry!
at 03:51 on January 18th, 2009
:) yes, the Yacht I can see that, I would not mind one my self to sail the seven seas once more, the last one got wrecked and sunk and well, no insurance. You do make a valid point about tax breaks not working to stimulate the economy. Part of every crisis is the reactions of the consumers that can make it worth or better. Japan is a Cash based society that does not believe in Credit and where credit cards are few and most shops do not accept them either.
This cash base thinking is in part what does help Japan in this crisis.