Time overdue for a world currency

Central banks create the problems, the solution one great big central bank??

OK, I vote we give the contract to the ECB, they seem to fit the bill of not being subject to the whims of governments and they’re used to working with multiple governments.

Agreement from the US?

Non?

ok then, back to bed.

The only way the Americans would agree to a global central bank is if it IS subject to the whims of the US government. That’s their number one priority.

-Rd

there used to be a world currency, the dollar.

And now it’s called the euro.

Tried a the concept alrady. It was called Bretton Woods. The ensuing collapse of that system led us to our present understanding of money.

I am not sure how those lessons of 30 years ago or more have now been unlearned.

Economists have short memories :stuck_out_tongue:

Aahhh.

I have just peaked at the article. One of the authors is from the IMF. The IMF is the tawdry remains of the institution that presided over Bretton Woods - still wandering aimlessly looking for a purpose. This would give it one.

The US went off of the gold standard when they realised they couldn’t afford the vietnam war.

Wasn’t talking about the gold standard. Bretton Woods was something entirely different.

It collapsed in the 1970s because the US (the largest region in this effective multi country monetary area) monetised the debt it accrued, in part associated with war expenditures, and caused global inflation and forced intolerable divergence in price levels across countries.

Sound familar? Monetary policy determined by one large region of a monatery area has monetary affects in other regions, which in turn casues divergence in relative prices and potential inflationary and recessionary problem across the region?

It could almost be the Euro zone no?

The real problem we face is that when the central banks finally realise monetary inflation is getting unbearable, they raise interest rates to support the purchasing power of their currencies…

The crux is the banks have been given crack cocaine over the last year to keep them liquid. Once the central banks remove the drug and try to fight the inflation they’ve had to create, everyone will see that nothing is solved in the banking sector. They can only survive if more and more inflation is inflicted on us.

Currency collapse is a possible outcome. To avoid it they’ll have to hike interest rates to unimaginable levels. 20 - 30%, which I can’t see them doing . They’ll opt for a global single world currency instead…

But the point is that adjustment of exchange rates is a good thing. It eases the adjustment in relative prices that is required. With fixed nominal exchange rates there will be irrepressable forces for adjustment in real exchange rates. The way that happens is that one country experiences unemployment and falling output creating excess supply until wages and prices fall. In the other country you get full employment and rising real wages. Ireland is the former now within the euro zone

Adjustment in exchange rates are a band-aid for economic mismanagement.

<waits_nerviously_for_30_seconds>

:smiling_imp:

I think the problem is still with the dollar. And the familiarity is entirely the same -

  • US fighting a war they can’t afford
  • in the '70s there was a proxy war in the Middle East resulting in the oil embargo; now the war is not proxy the US is directly involved, but arguably the result is the same (high oil prices)

The difference is that there is a now a counterbalancing currency to the dollar that may have the size and scale to resist having to follow its path.

I still see the world in two camps - those who will use inflation to rebalance their economy (wage levels) and those who will use economic slowdown to achieve the same goal.

You mean those who use inflation and an economic slowdown, and those who just have an economic slowdown.

:laughing:
Yup, that would be about the size of it!

Bernanke thinks he can act like Trichet.

Is Helicopter about to riase rates?

cbsnews.com/stories/2008/06/ … 1049.shtml