More On The Waste Arising From Multi Currency System - PART 4 Isokratia Global
A classic example of why we need one global currency, is the continued waste of funds by intervention from governments. Under pressure from political party gurus, pressure groups, multi-nationals, and other aspects, within each country, all based on fears that a depressed financial crisis in one region of the world, could spread to their countries, governments embark in massive waste.
Paradoxical contradictions in policies and aims, between some of the regions countries like the G7, in reference to the Euro which were experienced in the international currency arena. During the third week of September 2000 ( Daily mail Sept 21st 2000) at first, leaders such as the chief economists of the IMF commission, hammered the Euro and send it trampling down. Then the G7 will come to its rescue, for they quite rightly feared that a speculative devaluation of the Euro would for sure spread to their own currencies and world trade instabilities. Outsiders will complain for the steep under valuation of the Euro, whilst insiders like the Italian leaders and Portuguese leaders, will love the chief IMF economist, because due to the gross under valuation of the Euro, their export businesses were thriving.
On Tuesday 19th September 2000 as the IMF’s Chief Economies Michael Mensa said that the Euro’s weakness was a problem, not just an embarrassment. He then called that the time was right, for intervention to prevent any further decline of the Euro. Yet at the same time the leaders of Italy and Portugal issue statements against any intervention to boost the value of Euro (only because their export business was thriving, benefiting from a weak Euro). They blamed the American high interest for the under value of the Euro against the dollar and other currencies. Contradicting statements to suit each other’s goals at the time. ( afterwards as at December 2004 things have been reversed with low American interest allowing the dollar to slide against the Euro and sterling and Bush smiling)
The warnings by the IMF’s chief economist Michael Mensa triggered a fierce and angry back lash. Portugal’s central bank government Veto Constancio, who said the comments by Mr Mensa, were inappropriate and which somebody in his position would not normally make. Italian Prime minister Juliano Armado said the weak Euro was helping his country’s firms because their exports were now cheap. More contradictions from leaders and professionals.
Hans Peter Stihl made the statement saying that the strength of the US economy and the US high interest rates were the main reason for the Euro’s weakness. He added that the Euro’s current state was good for growth especially European exports. Yet, despite the position from those concerned within the European Union, the intervention went ahead.
The G7countries agreed to the use of foreign exchange to buy surplus Euros in the market place in the hope of driving up the Euro price. The buying came in three waves early on Friday 22nd September just as dealers were squaring their books for the weekend. Contradicting wishes and actions. The Europeans wanting the Euro to remain at a low exchange value but others technically pushing the Euro’s value up by artificial buying.
As news of the intervention broke, the Euro stretched from 80 cents to more than 90 cents and then slid back to 88.30. Co-ordination in the intervention involving all G7 governments, the United States, Japan, Britain, Germany, France, Canada and Italy is irrelevant. The last time they acted together was to save the Japanese Yen in 1995 and again, amid building concerns that Japan was moving into a depression which would could spread across Asia and the rest of the world. Did they manage to avert the depression in Japan? Of course not. Just a big waste.
What we are experiencing is vast wealth being wiped out, or created, on pure speculation. Yet the effects of such currency movements, are both sweet as well as sour. Sweet for those few taking advantage. Very sour for those who come under the market turmoil and menace of such fluctuations? Be it countries or individuals, or small and large business organisations. All absolutely unnecessary. Unjustified. Unfounded. All totally avoidable, un-allowable and intolerable, within a system of a global single currency.
Even the present powerful world institutions are powerless to curb such absolute waste. In an age when trillions of dollars cross the currency markets each day, finance ministries and central bankers are powerless on their own in turning the tides. For their action to work, they have to bring the big foreign exchange dealers along with them.
Despite the G7 heavy intervention to prop up the Euro there have been some indications in recent days of the big global investment funds getting nervous about betting against the Euro. Britain’s Chancellor, Gordon Brown, has been auctioning his gold reserves, replacing them with Euro. Why? Especially when Gordon Brown is not ready to join the Euro. Because export growth resulting from an under valued Euro, could mean that in the near future they Euro economies could overtake North America in the growth stakes. Also because the Chancellor needs to make money. However playing in the currency market with the UK’s public money can be dangerous! ( By end of 2002 the gold value outstrip all other forms of investment!). As the first signs appear of the slow down of the American economy, after a lengthy ten year growth, some people panic and they engage into desperate acts which can bear no fruit.
Sometimes is hard to justify the actions of the G7. Paradoxically and against all indicators, the Euro is massively undervalued, despite having seen the massive intervention of the G7. The question must be asked why? Why this waste? Why this massive intervention when the indicators do not match their worries?
Finally by end of 2002 with the American attack on Iraq looming and the massive drop in share values especially in England and America the Euro is gaining momentum and reached to $1.04.
Is it due to politics, or due to national interests? Is it related to the intense pressure from the big American multi-nationals, whose profit performance is measured in dollars? Why will that matter? The American governments worry about the value of multi-national shares. Because these multi-nationals operate in the Euro, their profits are made in Euro and then they are converted into dollars. This process of conversion from Euro to dollar caused them losses of billions in profits. These profit losses in turn affect the share values of these companies at home. These share fluctuations then affect the rest of the stock market, which in turn affect the whole economy at home; which in turn affect the every day citizen and investor.
Is this not a clear waste? Is this not a waste for a company’s profits? American or not if they have rightly earned their profits in parts of the world not trading in heir own country, why should they waste large sums just to convert their profits into their home currency.
Having a brake 14th September 2004 00.18 Sofia Bulgaria
Back to work 19 Sept 04 11.46pm Sofia Bulgaria