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| Wednesday, 8 December 2004 |
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A march towards a world of equal currencies by R. Dodampegama Each country of the world has its own unit of currency and it places a value on its currency. Arising from international trade or sale or purchase of services, etc. when international payments have to be made, the country's currency unit gets into the international money market and then, not the country concerned, but the money market decides its value. If we go back to the history of the money market, at the beginning, disparity between world trading currencies was negligible. At that time, the foreign currency markets were bona fide and devoid of sophistication. The Market forces operating in the market and market forces alone, decided the values of the currencies traded in the market. Then came into the market the so-called vested interests, some were counties and some were individuals and out went the market forces. They could create demand and so could they create scarcity. so much, even the Central Banks in the Third World countries have been taught to interfere in the market when their currencies fall. From there onwards, wide disparities began to develop between the currencies of the western block and that of the Third World. Beside this, the International Monetary Fund (IMF), now and the, demand poor countries to devalue their currencies against the value of Western currencies, notwithstanding the fact that history has shown that such compelled devaluations have never benefited the economies of such countries. When there are such wide disparities in foreign currencies, it makes the international trading ground so uneven. Imagine, globlization being played on such a ground. As a consequence, it makes goods and services so cheap to the West and so very expensive to others. Disparities in currency rates In 1960, the price of the US Dollar was about Rs. 11 which as now risen to over Rs. 104. If things go at this rate, the price of the US Dollar could rise to over Rs. 200 within the next few years. Already the Sterling Pound has risen to Rs. 185. In view of this enormously growing wide disparity in exchange rates, poor countries cannot ever dream of matching their imports with exports. It is this man made wide disparity in exchange rates that has begun to make rich countries richer and poor countries poorer. West in control of World Trade and Money Markets International Trade is in the hands of the West and so are the financial markets. As a result of the high disparities between western and other currencies, the West began to amass money and they set up the World Bank. Thereafter, in order to have a closer tap on the foreign currency markets, they set up the IMF. The latest running mate appointed to the foregoing team is its Team Leader "Globalization'. The pre-planning is indeed wonderful. The currencies of poor countries are at the mercy of the foregoing team. At the height of the East Asian Currency Crisis in 1998, the former Malaysian Prime Minister, Dr. Mahathir Mohamed, admonished the IMF for not showing any progress in its study to regulate currency trading. The then Managing Director of IMF, Michel Camdossus, had promised him to undertake such a study on regulations that could be considered to introduce more discipline in the market. As far as it is known, Dr. Mahathir Mohamed is the only State Head who challenged the double standards of the IMF so steadfastly. Bankruptcy of the Third World imminent During the height of the Communist regime in Russia, the West categorized the countries of the world into three: a. First World - Countries developed under Capitalism b. Second World - Countries developed under Communism c. Third World - Rest of the countries of the world. When communism fell in Russia, the third world countries were expecting a promotion to the second world without toiling for it. Instead, with globalization at full thrust, with highly overvalued western currencies, with no erudite and outspoken public figures like the celebrated Dr. Mahathir Mohamed of Malaysia to speak out, the third world countries are doomed to be damned into the Fourth World. Before the worst arrives the third world countries should get together, hold discussions and plan to set up monetary unions like how the European Union did and do all possible to avoid the on-going internal terrorist wars covertly intended to split up even the existing large nations like India, Russia and China. In a challenging stand, recently Cuba went to have their own currency instead of the US Dollar but they saw to it the parity between both currencies remains the same. Inter-State trade in United States of America The United States of America built by the Britishers and others over two centuries ago on the ashes of Red Indian country and their great civilizations have been divided into fifty States. Since then, these fifty States had been engaged, inter alia, in inter-state trade in one currency, viz., US Dollar. Over the years, the value of inter-state trade along with international trade rose steadily, so much so that in no time USA became the largest consumer market in the world. For example, today USA is the largest producer of oil and the largest consumer of oil in the world. It is the one currency principle in interstate trade that enhanced the value of the US Dollar and made it the leading currency of the world. Beside this factor, between the two world wars, Swiss banks started Euro Dollar bank accounts for the benefit of foreign nationals and fugitives who were seeking a safe neutral country to settle down midst the aftermath of the wars. This accounting system simply meant that foreign nationals could maintain secret accounts in Swiss bank in US Dollars. With the start of these accounts fugitives, royalty, the rich, the swindler and all went in a rush for these Euro Dollar accounts. This gave a further boost to the US Dollar. Birth of the European Union and the Euro Leading countries of Western Europe who studied and analyzed the progress of the US Dollar visa-a-vis their currencies in the foreign currency markets realized the factors that made the US Dollar so powerful. The US dollar could not have got powerful without an equally powerful back-up export trade. Of these the most important factor was the inter-state trade in the same or one currency. Thus, taking a lesson from the US, the forward nations of Western Europe got together and formed the European economic Community. Germany, France, Italy and some of the other countries joined. Britain agreed to join but kept a way from the monetary union. Ultimately, the European Union was formed with twenty-five countries joining to work in one common currency, the Euro. Earlier, there were twenty-five countries joining to work in one common currency, the Euro. Earlier, there were twenty-five currencies of different parties for these 25 countries and they were all replaced by one common currency. In no time the Euro also became a leading world currency throwing a challenge to the US Dollar. During recent market dealings it recorded higher values than the US Dollar. It is alleged that the immediate cause for the Iraqi invasion was that Saddam Hussein shifted to the Euro. It is time that the Political Leaders of Africa, Asia and the Far East plan monetary unions in the same manner as the Europeans did. It is agreed, that planning such unions is no easy task. It is costly and time consuming. The sooner some Leader/s took the lead so much the better. When the West is getting closer to each other, in the rest of the world there are separatist wars to split up even the existing unions, instead of putting all nations together. Economic emancipation of the Third World would remain a dream only, unless they get into Monetary Unions and thereby firstly reduce the wide disparity of their currencies as against western currencies and secondly gradually develop the firm stand to declare to the world that all currencies of the world are equal in value, no disparities, without putting our currencies into the boiling pot of the Money Market. |
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