RE AN INTERNATIONAL ECONOMY AND CURRENCY

RE AN INTERNATIONAL CURRENCY

In a borderless world, there would be no "current account" or "capital account" as between countries, because there would be no countries to maintain such accounts.  Goods might continue to be produced in places and shipped to other places, at times quite distant, just like before; but there would be no need to "keep score" regrding relative amounts of shipments to and fro, or comparisons of quantities of assets from one place that are purchased by individuals or entities of other places. 

To restate an oft-cited theme of mine once again, it appears that if there were no myriad of separate nations--which would obviate the existence of a variety of separate national currencies--these difficulties and concerns would automatically evaporate.  Wages could become similar all over the world; and so too would costs and prices.  Similar to the reasonable bases for the few differences set forth by me in earlier posts regarding wages for the same occupation (such as scarcity of personnel, or more difficult working conditions in certain places), variations in cost and/or price would be based simply and primarily upon expenses connected with transportation of goods from the place of production to the place of sale; and possibly with storage at the aforesaid place of sale or consumption. 

The only group who might not favor such a simple, but seemingly ideal, solution are currency speculators--who seem, by their efforts, to add no value to the world or its economy; and in deriving profit from their activities, appear to thus detract therefrom.  Currency speculation has been described as actually nothing more than betting on exchange rate movements.  The existence of numerous countries, each with its own ever-varying exchange rates as regards the currencies of all the other countries, has caused our world to become a game-board for currency traders and international financial speculators.  The currency exchange market has become a financial trading institution of its own, frequently performing more markedly, and consequently more profitably for the winners within its arena than could be had from other forms of financial speculation.  Its players are described as incessantly monitoring Reuters and similar reporting agencies, so as to divine and respond to their fellow-traders' interpretations of the financial news there displayed.  In that these reporting services are primarily broadcast in English, their news is said to be overreflective of the American point of view.  When it becomes apparent that a currency devaluation is imminent, speculators crowd in, like fish in a feeding frenzy, to reap profits for themselves, but producing benefit to no one else.

A dramatic example of the harms thereby caused is demonstrated in occurrences such as those which took place in Southeast Asia during the late 1990s.  In that instance, excessive economic excitement in Thailand's stock and real estate markets caused a sudden surge of speculative funds into the country, creating what could only be described as a "bubble."  An abrupt panicky reversal in the flow of speculators' currency brought about the collapse of the Thai baht, and a consequent flight of capital out of Thailand, as well as most of the other newly emerging Southeast Asian markets.  The value of the currencies of Indonesia, Malaysia, South Korea, and Thailand were quickly deflated like so many punctured baloons.  This produced an economic crisis having a ripple errect throughout the world; and brought the entire planet to the brink of a collapse similar in gravity to that which took place in 1929.

In his Globalization and its Discontents, economist Joseph Stiglitz laments that if currency cpeculators only gained profit from each other, their activities would have no positive or negative effect upon the rest of the rest of the world.  However, problems for the rest of us do indeed arise:  for example, when governments, at times supported by such institutions as the International Monetary Fund, overexpend or squander, in efforts to maintain an unrealistically excessive exchange rate.  The profits therefrom go tto the speculators--while the losses that constitute the other side of this balance are borne by the "ordinary people." 

In any event, the paradigms and guidelines that influence currency exchange rates, and hence the choreography of the currency market, are said to be inexact at best; and possibly untrue at worst.  Their main purpose is said to be the provision of opportunities for currency dealers to "make money"--a desire which is described as seemingly endless.

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Today's financial collapse is not connected to variations in the values of the world's various currencies.  But it can be attributed, at least in many aspects, to greed on the part of mortgage security traffickers, would-be real estate "flippers," and other unreasistic opportunists, who sought to create wealth via escalating value in ordinary assets and nebulous financial instrumentalities, without adding or otherwise contributing anything thereto, besides baseless hoopla and undue optimism.  Such attitudes and activities reflect one more instance of seeking financial advantage from nothing more than tomorrow's prices growing higher than today's due to no positive input by the hopeful beneficiary aside from theoretical recognition of a likely upward advance of present value--much akin to the traditional mindset of currency speculators.  In short, the chaos appears to be but another tragic consequence of reckless attempts by a few to make "something" out of "nothing."

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