Are we heading for a world currency Essay Example | Topics and Well Written Essays - 3000 words

Are we heading for a world currency - Essay Example Local markets are the key factors that created such zones. They seem to prosper economically if they are trading in one regional currency. Personally, I agree with the idea of a SGC, but, currently, the vastly varying political and economic landscapes of sovereign countries around the world are posing barriers to it. This paper will list and describe some of the factors, both for and against a SGC, and discuss why it is unlikely to achieve one in the near future. Presently, there exist some economic forces that favor the amalgamation of currencies. Below are some of the influencing factors. Troubled Currencies Since trade is so vibrant and persistent among nations, it is critical for the nations to have confidence in their local currencies and those of their business partners (Volcker 10). A confidence decline in a country’s currency will spread fear among all other countries that share trade relationships and interests with it, further leading to a currency pandemic. An examp le of this scenario is the currency calamity that befell Mexico, Argentina, Russia and Thailand. The then United States President, Bill Clinton, remarked that solving Mexico’s problems was not only significant to the rest of Latin America, but also developing countries in the whole world (Volcker 11). The fact that the Mexican catastrophe could stretch to neighboring countries in the region and affect their currencies informed this idea. Countries in Debt Countries that have lent money to other countries worry about the possibility of depreciating of the debt owed to them due to the occurrence of a currency crisis or devaluation (Hellyer 43). They seek assurance that their debts will be repaid in currencies that have not depreciated in value. This makes currency stability a worldwide concern and aim. Furthermore, countries that have previously experienced currency crisis stand to benefit if their currencies are converted to regional units (Hellyer 43). This has an effect of r educing fears of currency problems in the future. Multinational Companies Multinational companies face challenges in an attempt to price their products and record profits while working in many currencies (Hellyer 44). A currency consolidation is a welcome relief to financial officers of such enterprises. Online Banking With its already worldwide and well established infrastructure, online banking is a trend poised to last for long. Through it, money is constantly moving across borders without passing through conventional banking systems, making it a contributing economic factor favoring currency consolidation (Bonpasse 127). Factors Inhibiting Creation of a World Currency The factors above have contributed favorably towards the need for a SGC. They, however, raise questions as to how a SGC would be governed (Volcker 4). There seem to be two intertwined, key factors working against them, and they appear to carry the day; world political and economic platforms (Volcker 4). A third fac tor, religion, poses its own class of difficulty. A combination of all the factors put forward against a SGC has a general suggestion that the current world setting is simply not ready for it (Volcker 6). Religion Some religions, especially Islam, outlaw the amassing of interest on loan principal (Mustaqim 1). Religion forbids the faithful to charge interest to other faithful or the poor. Currently, large populations of religious faithful opposed to the paying of interest are