Argumentative essay
Introduction
Following the World War II, the disarray in the financial systems was apparent; Mexico, Russia, and even Europe were all victims of massive financial crisis. Inflated currencies in nations were just, but the start of bigger catastrophes, as armies could not be armored efficiently, schools could not be run as expected and worst of all the nurturing the growing industries became almost impossible. Well, although some individual states were insulated from the calamity that was, Economists warned of the impending disaster, given the close integration and the ever-deepening financial ties.
Brief history
The urge to have a uniform universal system of currency was evident. There were demands for a global monetary regime that is new. Political leaders, financial gurus and other advocates of a single global currency (SGC) met at Bretton Woods, a place in New Hampshire, during July 1-22, 1944, to plot on the economic order after the war. John Maynard Keynes, an Economist of the government of Britain suggested the establishment of the “bancor,” which is a world currency. The U.S. government otherwise suggested the “unitas” another world currency. Unfortunately, the schemes did not kick off. “As an alternative, the Bretton Woods arrangement lead to the U.S. dollar — its worth equal to gold at that time — being capped ‘the world reserve currency’. However, the place of the dollar as the unhampered world currency started being displaced with the decoupling of the dollar from gold in the year 1971” (Waking up to a new World currency, Alex Newman)The organization involved continues to meet annually with their aim being to deliver on the Single Global Currency by the year 2024.
Weaknesses of the current disintegrated systems
Different national currencies have certain implications. Firstly, it means that there will be adverse exchange rate fluctuations and trading costs among trading partners. Secondly, this will lead to increased mistrust among countries in reference to business transactions is inhibiting economic development. Third, there will be a high risk of suffering from inflation by developing countries. Lastly, there will be an easy loss of liquidity due poor management of safe assets.
Is there a way of averting the oncoming economic blow? Yes, there are a few things that can be done in that regard:
First, systematize the provision of international liquidity and introduce the use of Gold Bullion to support agreements between central banks. For instance by ‘multilateralising’ swap lines through centralizing the organization of swap lines at the IMF. This replaces a network of bilateral swaps with a simpler structure. The IMF at the apex would act as the center of this system and would do this by entering into swap agreements with the central banks of participatory nations, managing business deals in this respect. It could then come in aid of suffering countries and swap liquidity to help them pick themselves up.
Secondly, create reserve-pooling arrangements that go much further than self-insurance in foreign deposits.
Thirdly the IMF ought to be given more powers like the Precautionary Credit Lines and Flexible Credit Lines, further a help it create a mechanism through which it can borrow to support its reserves.
Outcome
Improved and efficient business transactions eventually leading to a global economic development. This will mean; schools will facilitate better education to students, armies will acquire top class, efficient armory, and business companies will grow to higher heights. The common person will be the center of enjoying better products as well as sustainable living standards.
Conclusion
References
A Single Global Currency? | Gold Eagle. (n.d.). A Single Global Currency? | Gold Eagle. Retrieved October 30, 2013, from http://www.gold-eagle.com/article/single-global-currency
Waking up to a World Currency. (n.d.). Waking up to a World Currency. Retrieved October 30, 2013, from http://www.thenewamerican.com/economy/economics/item/4498-waking-up-to-a-world-currency
vox. (n.d.). Reforming the international monetary system: Introducing a new eReport. Retrieved October 30, 2013, from http://www.voxeu.org/article/reforming-international-monetary-system-introducing-new-ereport
